Audited annual report as at 31 December 2012 KBC Equity Fund Public open-ended investment company under Belgian law (bevek) with a variable number of units/shares opting for Investments complying with the conditions of Directive 2009/65/EC UCITS No subscriptions will be accepted on the basis of this report. Subscriptions will only be valid if effected after a free copy of the simplified prospectus or prospectus has been provided.
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Audited annual report as at 31 December 2012
KBC Equity Fund
Public open-ended investment company under Belgian law (bevek) with a variable number of units/shares opting for Investments
complying with the conditions of Directive 2009/65/EC UCITS
No subscriptions will be accepted on the basis of this report. Subscriptions will only be valid if
effected after a free copy of the simplified prospectus or prospectus has been provided.
TABLE OF CONTENTS
1. General information on the bevek
1.1. Organisation of the bevek
1.2. Management report 1.2.1. Information for the shareholders 1.2.2. General market overview
1.3. Auditor's report
1.4. Aggregate balance sheet
1.5. Aggregate profit and loss account
1.6. Summary of recognition and valuation rules
1.6.1. Summary of the rules 1.6.2. Exchange rates
SWI
Schreibmaschinentext
No notification has been submitted for the sub-fund CSOB Akciovy Fond Dividendovych Firem and consequently this sub-fund must not be publicly marketed in Germany.
BOARD OF DIRECTORS OF THE BEVEK: Dirk Thiels, Head of Asset Allocation and Strategy Portfolios KBC Asset Management NV Wouter Vanden Eynde, Managing Director KBC Asset Management NV Olivier Morel, Financial Manager CBC Banque SA Theo Peeters, Independent Manager Luc Vanderhaegen, Private Banking & Wealth Management Branch General Manager KBC Bank NV Filip Abraham, Independent Manager
Chairman: Luc Vanderhaegen, Private Banking & Wealth Management Branch General Manager KBC Bank NV Natural persons to whom the executive management of the bevek has been entrusted: Dirk Thiels, Head of Asset Allocation and Strategy Portfolios KBC Asset Management NV Wouter Vanden Eynde, Managing Director KBC Asset Management NV
MANAGEMENT TYPE: Bevek that has appointed a company for the management of undertakings for collective investments. The appointed management company is KBC Asset Management NV, Havenlaan 2, B-1080 Brussels.
DATE OF INCORPORATION OF THE MANAGEMENT COMPANY: 30 December 1999.
NAMES OF THE DIRECTORS OF THE MANAGEMENT COMPANY: Chairman: D. De Raymaeker Directors: J. Lema, President of the Executive Committee J. Aerts, Independent Director P. Buelens, Managing Director J. Daemen, Non-Executive Director P. Konings, Non-Executive Director J. Verschaeve, Managing Director G. Rammeloo, Managing Director D. Falque, Non-Executive Director K. Mattelaer, Non-Executive Director K.Van Eeckhoutte, Non-Executive Director W. Vanden Eynde, Managing Director C. Sterckx, Managing Director P. Marchand, Managing Director
NAMES AND POSITIONS OF THE NATURAL PERSONS TO WHOM THE EXECUTIVE MANAGEMENT OF
THE MANAGEMENT COMPANY HAS BEEN ENTRUSTED: J. Lema, President of the Executive Committee P. Buelens, Managing Director J. Verschaeve, Managing Director G. Rammeloo, Managing Director W. Vanden Eynde, Managing Director C. Sterckx, Managing Director P. Marchand, Managing Director These persons may also be directors of various beveks.
AUDITOR OF THE MANAGEMENT COMPANY: Ernst & Young Bedrijfsrevisoren BCVBA, represented by Christel Weymeersch, Company Auditor and auditor recognized by the Belgian Financial Services and Markets Authority, De Kleetlaan 2, 1831 Diegem.
STATUS OF THE BEVEK: Bevek with various sub-funds that has opted for investments complying with the conditions of Directive 2009/65/EC and which, as far as its operations and investments are concerned, is governed by the Act of 3 August 2012 on certain forms of collective management of investment portfolios.
FINANCIAL PORTFOLIO MANAGEMENT: In this regard, please see ‘Information concerning the sub-fund’.
FINANCIAL-SERVICES PROVIDERS: The financial services providers in Belgium are: KBC Bank NV, Havenlaan 2, B-1080 Brussels CBC Banque SA, Grote Markt 5, B-1000 Brussels Centea NV, Mechelsesteenweg 180, B-2018 Antwerp
CUSTODIAN: KBC Bank N.V., 2 Havenlaan - B-1080 Brussels, Belgium.
ACCREDITED AUDITOR OF THE BEVEK: Deloitte Bedrijfsrevisoren BV o.v.v.e. CVBA, in the form of a CVBA (co-operative limited liability company), Berkenlaan 8b, B-1831 Diegem, represented by partner Frank Verhaegen, company auditor and auditor recognised by the Belgian Financial Services and Markets Authority.
DISTRIBUTOR: KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
PROMOTER: KBC
LIST OF SUB-FUNDS OF KBC EQUITY FUND
1. America
2. Belgium
3. BRIC
4. Buyback America
5. Buyback Europe
6. Central Europe
7. Commodities & Materials
8. Consumer Durables
9. CSOB Akciovy Fond Dividendovych Firem
10. CSOB BRIC
11. Eastern Europe
12. Euro Cyclicals
13. Euro Finance
14. Euro Non Cyclicals
15. Euro Telecom & Technology
16. Europe
17. Eurozone
18. Fallen Angels
19. Finance
20. Flanders
21. Food & Personal Products
22. Global Leaders
23. Growth by Innovation
24. High Dividend
25. High Dividend Eurozone
26. High Dividend New Markets
27. High Dividend North America
28. Industrials & Infrastructure
29. Japan
30. Latin America
31. Luxury & Tourism
32. Medical Technologies
33. Millennium
34. New Asia
35. New Markets
36. New Shares
37. Oil
38. Pacific
39. Pharma
40. Pharma Growth
41. Quant EMU
42. Quant Europe
43. Quant Global 1
44. Satellites
45. SRI Equity
46. Technology
47. Telecom
48. Turkey
49. US Small Caps
50. Utilities
51. World
SHARE CLASSES The characteristics of the different share classes are given in the prospectus. The following sub-funds have a share class called ‘Classic Shares’:
America
Buyback America
Buyback Europe
Central Europe
Commodities & Materials
Consumer Durables
Eastern Europe
Euro Cyclicals
Euro Finance
Euro Non Cyclicals
Euro Telecom & Technology
Eurozone
Finance
Food & Personal Products
Global Leaders
Growth by Innovation
High Dividend
High Dividend Eurozone
High Dividend New Markets
High Dividend North America
Industrials & Infrastructure
Japan
Luxury & Tourism
Medical Technologies
Millennium
New Asia
New Markets
Oil
Pacific
Pharma
Pharma Growth
Quant EMU
Quant Europe
Quant Global 1
Satellites
SRI Equity
Technology
Telecom
Turkey
US Small Caps The following sub-funds have a share class called ‘Institutional Shares’:
SRI Equity
The following sub-funds have a share class called ‘Institutional B Shares’:
America
Buyback America
Buyback Europe
Central Europe
Commodities & Materials
Consumer Durables
Eastern Europe
Euro Cyclicals
Euro Finance
Euro Non Cyclicals
Euro Telecom & Technology
Eurozone
Finance
Food & Personal Products
Global Leaders
Growth by Innovation
High Dividend
High Dividend Eurozone
High Dividend New Markets
High Dividend North America
Industrials & Infrastructure
Japan
Luxury & Tourism
Medical Technologies
Millennium
New Asia
New Markets
Oil
Pacific
Pharma
Pharma Growth
Quant EMU
Quant Europe
Quant Global 1
Satellites
SRI Equity
Technology
Telecom
Turkey
US Small Caps
In the event of discrepancies between the Dutch and the other language versions of the (Semi-)Annual report, the Dutch will prevail.
1.2 MANAGEMENT REPORT
1.2.1 INFORMATION FOR THE SHAREHOLDERS Pursuant to Article 96 of the Companies Code, information is supplied regarding the following: The balance sheet and profit and loss account provide a true and fair view of the performance and
results of the undertaking for collective investment. The ‘General market overview’ section includes a description of the main risks and uncertainties facing the undertaking for collective investment.
No important events took place after the close of the financial year. As regards events that might have a material impact on the development of the undertaking for
collective investment, please refer to the ‘Outlook’ heading in the ‘General market overview’ section.
The undertaking for collective investment does not conduct any research and development. The undertaking for collective investment does not have any branch offices. In establishing and applying the valuation rules, it is assumed that the undertaking for collective
investment will continue to pursue its activities, even if the profit and loss account shows a loss for two consecutive financial years.
All information required by the Companies Code has been included in this report. The risk profile of the undertaking for collective investment specified in the prospectus provides an
overview regarding risk management.
1.2.2 GENERAL MARKET OVERVIEW 1 January – 31 December 2012 Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. The debt crisis in Europe continued to rage unabated. Five euro countries have already needed a bailout from the European emergency fund. Greece twice reached an agreement during the year with its private sector creditors concerning a rescheduling of its bond debts. Spain came into the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. Slower growth or economic slump? Although more jobs have been created than lost in the US since 2010, the rate of employment growth has remained on the low side. Pay also increased very little. Household purchasing power consequently rose to only a limited extent and provided little support for economic growth, which remained extremely lacklustre (+2.1% y-o-y in the first three quarters of 2012). Real GDP in the EMU contracted by an annualised 0.3%. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany played its traditional role as European economic engine to a lesser extent than in the recent past. Greater divergence within Europe resulted primarily in a further decline in unemployment in Germany and an alarmingly rapid rise in unemployment in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery. The weak growth in the industrialised Western economies was not without its impact on the export performance in emerging countries. In recent years, however, domestic demand (due to a rapidly growing middle class with a high consumption ratio) and inter-regional trade within Asia have been playing an increasingly important role. The region is better armed to deal with financial crises than it was in the past. Public finances are healthy, the balance of payments is generally neutral (China actually has an astronomical surplus) and the internal savings buffer is high. Asia’s economic development no longer depends on fickle foreign capital. Thanks to the contribution by the New World the growth of world GDP held up in 2012 (estimated at 2-2.5%).
Stemming the euro crisis There have been no significant bankruptcies in the business sector. The solvency and liquidity of non-financial companies have seldom been as strong as they are at present. A new feature of this cycle is that government paper, which had previously been seen as entirely risk-free, also started to be tainted with a degree of credit risk. What started as an isolated problem on the periphery of the euro area developed into an issue concerning the credibility of the monetary union and its institutions. In autumn 2009 – three years ago already – it became clear that Greece's official statistics had painted a highly flattering picture of its public finances; as a result, bond investors lost confidence and many refused to continue to fund Greece. After Greece had elaborated its own bailout programme (April 2010), it rapidly became clear that the EMU had a need for a structured bailout framework. This initially took the form of the Financial Stability Facility (EFSF, May 2010) and from 1 October 2012 the permanent European Stability Mechanism (ESM), a fully-fledged supranational institution with its own legal personality. The Greek debacle and lack of political consensus on a blueprint for a renewed currency union continued to fuel mistrust among bond investors. Ireland (November 2010), Portugal (April 2011), once again Greece (July 2011), Cyprus (June 2012) and Spain (with the bailout fund for the banks in June 2012) had to concede that they were no longer able to raise finance in the market and took shelter under the European umbrella. The support of Europe (and the IMF) is dependent on strict austerity policies, which are periodically reviewed. The Greek government's first, rather draconian, austerity plan was not stringent enough and came up against much political opposition. The period July 2011 – May 2012 was one of complete political chaos. In March 2012 agreement on debt restructuring was concluded with the private bondholders, under which Greece was able to eliminate more than 100 billion euros in debt. In December 2012 the European partners relaxed the interest and repayment terms on bailout fund loans to Greece. As a result of all these operations Greece's debt ratio remained sky-high (190% of GDP at the end of 2012) that the financing burden has become appreciably more realistic and there has been a marked change in bond ownership patterns: over 80% of Greek debt is now held by the public sector (European governments, central banks and the IMF). Speculation concerning the Greek exit from the EMU has dried up. In the course of 2012 the markets have shifted their attention from Greece to Spain. The Spanish government has already drawn on the EFSF for the recapitalisation of its banks. In the meantime other problems are also attracting attention: the recession is deeper than had been thought, the austerity policy has already been revised as many as four times in the course of 2012 and regional finances are seriously dislocated. In a lengthy address on 3 August, Prime Minister Mariano Rajoy once again emphasised the severity of the situation and drew the attention of the Spanish people to their responsibilities, while also not ruling out immediate cooperation with the EFSF. By the end of the period under review, no formal application for aid had, however, been filed. As traditionally faithful investors in government bonds, the European banks, which had seen their capital base eroded in the 2008/09 credit crisis, were oversensitive to the consequences of the euro crisis and the write-downs on their bond portfolios. The euro crisis could therefore easily end up as a systemic crisis. Avoiding this provided the driver for the European Central Bank (ECB) to intervene actively, especially by buying Spanish and Italian government paper. After Draghi took over from Trichet at the ECB, the heavy artillery was brought in. In December 2011 and in February 2012 two LTRO programmes were launched under which banks were able to borrow on extremely favourable conditions for a term of 36 months. Funds totalling 1 000 billion euros were borrowed, to be invested primarily in Spanish and Italian bonds. In September the ECB introduced its bazooka in the form of Outright Monetary Transactions (OMT). The ECB expressed its willingness to buy up troubled government debt with maturities of up to three years for an unlimited period and in unlimited quantities, provided a number of conditions have been met. The most important of these is that the government in question submits a formal request for a bailout under the ESM. For this reason the OMT programme has so far been unable to start up. The financial markets have not been disturbed by this. For them the setting up of the European bazooka was enough in itself to regard the euro crisis as having been definitively averted. At least for the present.
Public finances have gone off the rails not only in the EMU, but also in the UK and the US. The budget debate in the US has become mired in a political impasse. The divisions between Republicans and Democrats are considerable and are ideologically driven. Aware of their inability to work out a policy and fearful that the stalemate could lead to an uncontrolled explosion in debt, the parties have passed automatic spending cuts into legislation to reduce the budget deficit to 3% of GDP over a period of ten years. The concrete measures to this end are damaging the priorities of Democrats and Republicans alike. Untangling this Gordian knot will be the major challenge facing the new Congress, which will be installed 3 January 2013. In extremis the retiring Congress decided on New Year's Day to postpone the date on which the automatic spending cuts come into effect until 1 March. New record for corporate earnings The recovery in corporate earnings as from Q4 2009 was just as impressive as the decline in earnings during the recession. So although the economic recovery in the West may be modest, the same was certainly not true of corporate earnings. After going from negative to positive in the last quarter of 2009, earnings per share of the S&P 500 companies as a whole rose by an average 48% in 2010, by 14% in 2011 and by 3.5% in the first nine months of 2012. The lacklustre economic situation in the West was not an obstacle to a strong increase in turnover. The emerging economies, which are booming, are becoming an increasingly significant market outlet for Western companies. However, the improved earnings were due more to a sharp reduction in (wage) cost pressure than to increased turnover, at least until the first quarter of 2012. Expensive commodities: more than a gauge of the economic recovery The Arab spring and the war in Libya caused the oil price to surge in spring 2011. The price of a barrel of Brent crude stood at 126 USD at the end of April 2011. When the US and Europe reduced their strategic stocks in a joint action in June 2011, the trend was broken but not fundamentally reversed. Tension surrounding Iran's nuclear programme led to upward pressure on prices in early 2012. At the end of December 110 USD was once more being paid for a barrel of crude oil. The steep price rises on most other commodity markets had already come to an end earlier. The prices of many industrial metals and agricultural products peaked around mid-February 2011. This was followed by a correction of 15-20%. This too could be interpreted as a sign of increasing doubts about the economy. Inflation cooled. In the US the annual increase in the consumer price index fell from a peak of 3.9% in September 2011 to 1.8% in November 2012. Inflation in the EMU dipped from 3% to 2.2% in the same period. VAT increases and higher charges for government services in a number of euro-area countries prevented a sharper decline in inflation. A policy of (almost) free money and other unconventional measures The US central bank (the Fed) had already cut its key rate very early on in the crisis. Since December 2008 the rate has been a symbolic 0.25%. The European Central Bank waited considerably longer before cutting interest rates. When Mario Draghi took the helm at the ECB on 1 November 2011, the die was cast in favour of monetary easing. Its key rate is 0.75% at present. A rule of thumb states that it takes about six months before a rate cut has a positive impact on the real economy, and the effects wane after about eighteen months. Therefore, it came as no surprise that the Fed resorted to other measures, intervening directly on the bond markets and buying up large amounts of debt paper in an attempt to keep the long-term rate low, as well. The ECB dragged its feet, and only followed the Fed’s example much later. The intensification of the euro crisis in fact left the ECB no other choice.
Bond markets volatile Increasing doubts about the economy and the ongoing euro crisis have pushed US and German bond rates down since March 2011. This trend was sustained in 2012. On 1 June, the US and German ten-year rates hit lows of 1.45% and 1.15%, respectively. Bond portfolios were restructured en masse. Debt paper issued by under-fire European governments was dumped, in spite of the international guarantees, and replaced by German paper. During the course of 2012 the market segment most in the firing line was that for Spanish government bonds. The Belgian-German rate spread also suffered from the tensions in the euro area at times. The days when Belgium could borrow money at the same terms as Germany are long gone. The high government debt, the problems in the financial sector, the unbalanced financing of federal and regional governmental responsibilities, the lack of political consensus concerning a sustained austerity policy and the centrifugal effect of communal relations in Belgium were reasons enough to make foreign investors wary at times. As a result, the Belgian-German rate spread peaked at 365 basis points on 25 November 2011. In 2012 the storm eased, particularly in the euro area. At the end of the period under review bond investors were satisfied with a premium of 45 basis points for the Belgian risk. Consolidation of the stock-market rally The initial phase of the economic recovery went hand in hand with a fine stock-market rally, resulting in the S&P 500 being 75% higher at the end of April 2010 than its low point on 9 March 2009. Since then, the equity markets have struggled to find fresh impetus. The euro crisis and fear that the European banking sector would collapse naturally continued to cast a dark cloud over the market. On top of this, the stock markets were affected by vacillating sentiment about the economic situation, and the same is true of 2012. In the first three months the markets were buoyed up by relative economic optimism. After the gains slackened in April and May, a fine rally occurred from early June onwards, thereby negating the gloomier economic signals. The MSCI All Countries (the broadest global index) was up 14.5% in euros on 31 December compared to year-end 2011. Of the traditional markets, Western Europe (MSCI Europe return index up +18.4% over this period) managed to claw back some of the underperformance that had been built up since the start of the euro crisis in autumn 2009. Nevertheless the problems continued to mount in the EMU: they include the Greek debt restructuring, the threat of an extremist separatist party winning the Greek elections, the undercapitalisation of Spanish banks, the referendum in Ireland, and the financial collapse in Cyprus. Apparently the underperformance of European shares over many years has increased the valuation gap with US shares to such an extent that fresh events in the euro crisis have less impact on the stock markets. Wall Street closed the year substantially higher on balance (S&P500: +13.4%, Dow Jones: +7.3%), while European investors also benefited from a small increase in the value of the dollar (return MSCI USA in euros: +13.9%). The BEL 20 rose by +18.8%, more or less in line with the performance of other European markets. The Belgian bank shares KBC and Ageas recorded the strongest performance. Solvay and AB InBev, which has taken over the Mexican market leader Modelo, were also once again star performers. D’Ieteren, Mobistar and especially Delhaize, which is grappling with structural problems in its two main markets, were the main disappointments during the period under review. The return on the Japanese stock exchange (+6.1%) was positive but hardly convincing within a global perspective. Over the past years (and indeed decades) the Japanese market has lost much of its attraction. Domestic investors are sceptical about the country’s economic and political stability. Foreign investors, who previously capitalised on growth in Asia via the Tokyo stock exchange, now have better (direct) alternatives. The Asian emerging markets (+20.4%) lagged behind well into 2011, but were able to regain ground as from early 2012. Investors were worried about rising inflation and the tightening of monetary policy. Developments in recent months have proved that to be unjustified. Stock-market valuations remain favourable, especially given the high growth forecasts, sound macroeconomic balance and a banking sector that was barely – if at all – affected by the credit crisis.
Latin America (+6.8%) was also affected in the early part of 2011 by fears of overheating. The link to the commodity markets is always at the fore. Eastern Europe (+16.1%) was a divided region. The Russian stock market excelled until mid-2011, owing to the increase in oil prices. This later changed when oil prices slipped, which had an immediate effect on the valuation of oil companies and an indirect effect by way of a higher premium for the 'Russia' risk because of the resultant fall in government revenue. There were major differences in the returns for the various sectors. The best performing sectors included Financials, Pharmaceuticals and Consumer Discretionary. The worst performers included Energy, Utilities and Telecommunication Services. The outperformance of the Banks is no doubt associated with the quantitative easing programmes undertaken by the central banks. That entails the Fed’s QE3 and, more especially, the announcement of OMT by the ECB, which eased the pressure of the euro crisis. Pharmaceuticals had been shunned for a long time due to a lack of product innovation, patent expiry and the reforms to healthcare insurance in the US. In recent months investors began to focus on the sector’s response to these challenges: restructuring operations and the sell-off of non-strategic divisions. Media put in a very strong performance. The advertising markets emerged from a deep trough thanks to the Olympic Games and the presidential elections in the US. Other significant trends are the increasing popularity of e-books and the ongoing breakthrough of digital television. The oil companies suffered from the vagaries of the oil market, the political instability in the Middle East and frequent accidents. The consequences of the Fukushima nuclear disaster continued to cast a shadow throughout the world over the future of nuclear power plants. The anticipated strong growth in mobile data traffic necessitates further investments in network capacity, and it is uncertain whether the proposed budgets of the telecom operators will be sufficient. Outlook The US and European barometers measuring confidence among business leaders peaked in spring 2011 at record levels, but have slipped over the past 18 months. In the US they have ended up in the twilight zone between recession and expansion. In Europe they are below freezing-point. We are expecting US growth to remain positive but modest (around 1.5-2% y-o-y in the coming quarters) as jobs growth remains moderate, pay increases are barely keeping pace with inflation and budgetary policy has now finally (and probably for many years) struck down the path of austerity. The fragile recovery of the housing market and of corporate investment could be sustained. In Europe the budgetary plans, the banks' tighter lending policy and the high level of uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could still see a further contraction in European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified. The foundations for more sustainable growth in 2013 and beyond have been laid in recent years. US households have trimmed back their debt level significantly, the savings rate has already increased considerably and loan servicing (instalments and interest payments combined) now accounts for only 10% of household budgets (the lowest level in fifteen years – it was at 14% three years ago). Households are gradually moving towards a position where they can spend more of their money on consumption. The explosive growth in earnings between 2009 and 2012 bolstered companies’ already substantial cash positions. Investments were scaled back considerably during the crisis, with the foundations being laid for a catch-up process. After much squabbling between the Democrats and Republicans a compromise was after all reached on New Year's Day concerning the most urgent budgetary issues. The agreement creates certainty as to households’ tax position, while the budget deficit is being reduced sharply by a mix of tax increases and spending cuts. The agreement is however insufficient to restore US federal finances to sound health. Further measures are in the offing and a fresh programme of cuts may be expected as early as spring 2013. While that may be regarded as certain, how far the cuts go, what form they take and over what timeframe they will be spread out will need to become clear in the coming months. Lastly, the Fed is making unprecedented cash injections with its programme for purchasing government bonds and other debt paper. In doing so it wants to avert the risk that the banks will focus unduly on their solvency by insisting on overly strict lending conditions and so undermine economic growth. These cash injections will either find their way into the real economy or generate inflationary expectations. In any case they will keep long rates low and banish any fears of deflation.
Economic growth in Europe will in any event remain below par. There is a greater need for budgetary reform in Europe than in the US, monetary policy in Europe is less aggressive, and banks' lending policy more restrictive. The euro crisis has led the European banks to adopt a tough stance on lending. In contrast, real wage rises (however limited) will be somewhat higher in Europe than in the US. Today’s world is one of two-speed economies. The mature industrialised economies (US, Europe, Japan) still find themselves in a low-growth environment, with no underlying inflationary pressure, persistently low interest rates and runaway public finances. The picture in the 'new world' is altogether different. The strong economic growth has already created inflationary pressure in Asia. As a result, monetary policy in the region will need to be more cautious, or even restrictive (as in 2011) rather than accommodating (as at present). Monetary policy in China and elsewhere in Asia is therefore primed for adjustment and geared to preventing asset-price inflation. This implies not only adjusting interest rates but also active intervention on the credit and foreign exchange markets. This cautious policy is beginning to bear fruit. In China, the rate of increase in the money supply has already slowed considerably, to match the rate of nominal GDP growth. Inflation has fallen from 6.5% in September 2011 to 2.1% in November 2012. The risk of overheating therefore appears under control. In a year in which there will be a change in leadership of the Chinese Communist Party will be installed, little will be left to chance and economic growth will be barely lower than in previous years. One of the major challenges for this decade will be the further development of consumption in China and the rest of Asia. That could help bring about a more balanced economic world order: it will not only reduce the region’s dependence on exports but, at least as importantly, will have an effect on international capital flows. More consumption in China will mean lower savings and higher imports, including from the US. That will help the West to ‘grow out’ of its debt problems. Time is of the essence for the euro area. Everyone knows that the EMU is not a perfect monetary union. In its twelve-year history, little has been done to improve its internal operation. National autonomy was off-limits. The crisis brought the realisation that economic governance, as it is now called in Eurospeak, needs to be tackled as a matter of urgency. In concrete terms, this involves measures such as supranational supervision of banks, strict monitoring and sanctioning of budgetary policy, monitoring of pay policy and harmonising European taxation. In the coming months the organisation of the ESM (European Stability Mechanism, which came into operation from 1 October 2012) the installation of the pan-European banking supervision within the ECB (to be in place by 1 March 2014) and the implementation of the Fiscal Stability Treaty (in force since 1 January 2013) will continue to demand considerable energy and diplomatic dexterity. Work on a new architecture for the EMU cannot be postponed, even though the European leaders are having to turn their attention from one emergency to another, which is not conducive to a calm climate for negotiations. The capital base of banks will need to be strengthened further to ensure the stability of the financial system, so that there is a sufficient buffer to offset reserves and unforeseen write-downs. That will be just as important in 2013 – and probably after that too – as it was in 2011 or 2012. All the measures required to achieve this are being taken. Examples include the almost 2 000 billion euros that were set aside in the space of two years in order to ensure the smooth funding of European governments, the introduction of stress tests to establish whether the banks have sufficient capital to cope with a new and serious crisis, the gradual introduction of new and/or stricter capital requirements under Basel III and making the reserves of the ESM available for direct loans to ailing European banks. Maintaining a (virtually) zero money market rate also fits with this. There is no urgent macroeconomic reason to adopt a more restrictive policy so long as the economic situation in the West remains weak and there is no sign of any real inflationary pressure.
The central banks are conducting a policy of low interest rates and have totally given up their resistance towards quantitative easing measures. They are intervening directly on the capital markets on a large scale. By buying bonds and other debt instruments, they are having a direct influence on the bond yield in certain market segments, ensuring secondary trading (for instance, in paper issued by governments in which the market could lose confidence) and flooding the financial system with cash. The ECB, too, is now firmly set on this path. Concern about inflation has given way totally to worries about the economic situation and stemming the euro crisis. The ECB is probably still striving for a 'normal' short rate of 2% for the euro area, but that has now become a very long-term objective and is totally ruled out in the short term. It is more likely to cut than increase the key rate in the coming months. The first rate hike is not expected until the second half of 2014 at the soonest. In our opinion, the central banks in the US, the UK and Japan will wait even longer before raising their key rates. The US Federal Reserve has already officially postponed the earliest date for a rate hike to mid-2015. The bond yield may have bottomed out, at least as regards issues of German Bunds or US Treasuries. It would be logical for yields to increase again from the current record lows, on the back of an improved economic environment (or an ongoing reduction in the downside risks to growth). As a result, the market might, in the coming months, start to anticipate tighter monetary policy in 2014 or 2015. A number of unconventional measures will first be withdrawn in the US; only after that can the market begin to anticipate a normalisation of the key rate. Fears of a total derailment of the budget in the US and/or inflation due to the unorthodox policy in the recent past could push up the risk premium. This interest-rate increase need not, however, be very big. The measures taken by the central banks are also keeping the short end of the yield curve artificially low. Nor will they hesitate to intervene actively in the market segments where yields threaten to head too rapidly in the wrong direction. The default risk premium in the corporate bond market has already come down steeply. It remains relatively high, both by historical standards and considering that most companies have a healthy financial structure. There is therefore still some potential for a narrowing of spreads. Rate spreads in the euro area will probably remain high for a long time yet, and will certainly remain volatile, due to the many problems that still have to be solved. Thanks to the continued strong growth in the emerging markets, the global economy could post growth of 2–2.5% in 2012 and 2.5–3% in 2013. This is one of the reasons why corporate earnings could continue to grow in the coming quarters at a rate of 5–10%. It seems paradoxical that companies have emerged as the winners from the 2008/09 crisis. They are now reaping the benefits of the considerable restructuring measures pushed through during the recession. Cost controls go beyond (one-off and in some cases spectacular) restructuring measures and have now become an integral part of business culture. The recession of 2008/09 caused companies to be even more aware of risks (i.e. money, and hence costs). Investment projects are subject to a more thorough profitability study. A combination of debt reduction and low interest rates has resulted in a steep drop in financial charges. Globalisation (pressure of relocation) and ongoing high unemployment have made employees powerless to demand high pay increases. Maintaining purchasing power is now about all that is on offer. There is no question of real wage rises. In brief, every cent increase in revenue goes (almost) entirely to the capital factor. The money market rate won’t increase rapidly and bond yields are close to historical lows. Everything seems to point to shares being the most attractive investment option for the months ahead. The lack of alternatives is not, of course, sufficient reason to increase the market valuation. For that to happen, investors will need to be more predisposed to taking risk. The present valuation prices in very gloomy scenarios. Based on forecast earnings for 2013, the price-earnings ratio is 13.5 for the US S&P 500 index and 11.4 for the MSCI Europe. That is 25% and 30% respectively lower than the historical average. Equities are certainly dirt-cheap compared with bonds. The earnings yield – the inverse of the price/earnings ratio – is currently 8.7% for the MSCI Europe, an unprecedented premium of some 740 basis points above German bond yields. Edited to 4 January 2013.
1.3 AUDITOR’S REPORT
KBC Equity Fund NV Undertaking for collective investment in transferable securities under Belgian law
Statutory auditor's report for the year ended 31 December 2012 to the shareholders’ meeting
To the shareholders
As required by law and the company’s articles of association, we are pleased to report to you on the audit assignment which you have entrusted to us. This report includes our opinion on the financial statements together with the required additional comments.
Unqualified audit opinion on the financial statements
We have audited the financial statements of KBC Equity Fund NV for the year ended 31 December 2012, prepared in accordance with the accounting principles applicable in Belgium, which show a total net asset value of 5.018.937.648,53 EUR and a profit for the year of 482.568.162,47 EUR. An overview of the total net asset value and result for each compartment is given in the following table:
Name Compartment Currency Total net asset value Result
Belgium EUR 36.137.904,49 8.699.953,17
World EUR 83.354.531,98 11.593.274,57
Europe EUR 96.616.430,95 11.657.716,90
America USD 405.778.341,08 28.937.228,97
Japan JPY 778.791.718,00 118.880.401,00
New Markets EUR 82.469.472,46 10.571.648,94
New Asia EUR 235.229.370,36 35.436.375,75
Latin America EUR 42.118.031,75 1.578.169,27
Eastern Europe EUR 57.048.893,24 14.036.081,02
Technology USD 447.977.748,30 12.125.921,67
Flanders EUR 21.204.926,27 5.561.965,77
Pharma EUR 214.961.290,23 22.991.477,43
Finance EUR 313.581.664,26 47.312.505,74
Telecom EUR 77.593.118,68 3.789.278,00
Growth By Innovation EUR 64.736.622,53 4.227.298,72
Buyback America USD 227.191.670,82 10.937.158,01
US Small Caps USD 18.362.058,67 2.864.377,30
Utilities EUR 20.271.755,08 136.379,72
Food & Personal Products EUR 146.183.954,54 16.559.674,91
New Shares EUR 16.421.422,63 2.184.938,73
Medical Technologies USD 16.223.351,68 2.029.296,47
The board of directors of the company is responsible for the preparation of the financial statements. This responsibility includes among other things: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with legal requirements and auditing standards applicable in Belgium, as issued by the “Institut des Reviseurs d’Entreprises/Instituut der Bedrijfsrevisoren”. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
In accordance with these standards, we have performed 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 the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we have considered internal control relevant to the company’s preparation and fair presentation of the financial statements 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 company’s internal control. We have assessed the basis of the accounting policies used, the reasonableness of accounting estimates made by the company and the presentation of the financial statements, taken as a whole.
Finally, the board of directors and responsible officers of the company have replied to all our requests for explanations and information. We believe that the audit evidence we have obtained provides a reasonable basis for our opinion.
In our opinion, the financial statements as of 31 December 2012 give a true and fair view of the company’s assets, liabilities, financial position and results in accordance with the accounting principles applicable in Belgium.
Additional comments
The preparation and the assessment of the information that should be included in the directors’ report and the company’s compliance with the requirements of the Companies Code and its articles of association are the responsibility of the board of directors.
Our responsibility is to include in our report the following additional comments which do not change the scope of our audit opinion on the financial statements:
The directors’ report includes the information required by law and is in agreement with the financial statements. However, we are unable to express an opinion on the description of the principal risks and uncertainties confronting the company, or on the status, future evolution, or significant influence of certain factors on its future development. We can, nevertheless, confirm that the information given is not in obvious contradiction with any information obtained in the context of our appointment.
Without prejudice to certain formal aspects of minor importance, the accounting records are maintained in accordance with the legal and regulatory requirements applicable in Belgium.
No transactions have been undertaken or decisions taken in violation of the company’s articles or the Companies Code such as we would be obliged to report to you. The appropriation of the results proposed to the general meeting is in accordance with the requirements of the law and the company’s articles.
Diegem, 6 March 2013 The statutory auditor
DELOITTE Bedrijfsrevisoren / Reviseurs d’Entreprises BV o.v.v.e. CVBA / SC s.f.d. SCRL Represented by Frank Verhaegen
1.4 AGGREGATE BALANCE SHEET (IN EUR)
Balance sheet layout 31/12/2012 (in the currency of the bevek)
31/12/2011 (in the currency of the bevek)
TOTAL NET ASSETS 5.018.937.648,53 2.882.691.406,39
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 10.697.447,71 10.215.699,09 a} Collateral received in the form of bonds 115.963.929,27 86.456.696,25 C. Shares and similar instruments a) Shares 4.731.536.189,90 2.697.994.076,00 Of which securities lent 102.415.394,24 95.464.199,40 b) Closed-end undertakings for collective
investment 121.837,50 3.173.420,30
D. Other securities 410.452,44 144.218,23 E. Open-end undertakings for collective investment 164.077.095,41 148.831.047,90 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -38.695,86 -76.116,88 m) Financial indices Futures and forward contracts (+/-) -580.238,37 71.505,61 n) Derivative financial instruments Swap contracts (+/-) -74.016,00 3.131.760,00
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 13.206.129,13 11.104.541,72 b) Tax assets 1.716.060,03 1.487.020,96 c) Collateral 3.848.027,84 3.216.727,55 B. Payables a) Accounts payable (-) -13.093.023,76 -14.167.370,32 c) Borrowings (-) -5.928.535,07 -4.687.242,44 d) Collateral (-) -115.963.929,27 -86.456.696,25
V. Deposits and cash at bank and in hand A. Demand balances at banks 114.666.774,39 22.220.864,47
VI. Accruals and deferrals A. Expense to be carried forward 136.571,08 B. Accrued income 4.891.355,71 4.778.005,13 C. Accrued expense (-) -6.519.212,18 -4.883.322,03
TOTAL SHAREHOLDERS' EQUITY 5.018.937.648,53 2.882.691.406,39
A. Capital 3.739.655.678,05 2.064.267.427,65
B. Income equalization -1.062.917,07 -22.490.748,07
C. Profit(Loss) carried forward 797.776.725,06 1.339.153.804,96
D. Result for the period 482.568.162,47 -498.239.078,17
I.A.B Cash at bank and in hand/deposits 3.848.027,84 3.216.727,55
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 69.258.586,17 46.793.715,93
III.B Written futures and forward contracts -265.473,30 -4.408.565,91
IV Notional amounts of swap contracts (+) 29.000.000,00 15.600.000,00
IX Financial instruments lent 102.415.394,24 95.464.199,40
1.5 AGGREGATE PROFIT AND LOSS ACCOUNT (IN EUR)
Income Statement 31/12/2012 (in the currency of the bevek)
31/12/2011 (in the currency of the bevek)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -1.686.639,42 33.396,19 b) Other debt instruments b1 With embedded derivative financial
instruments 35.367,36
C. Shares and similar instruments a) Shares 442.918.219,03 -482.698.380,89 b) Closed-end undertakings for collective
investment 87.421,53 84.273,91
D. Other securities -313.636,60 -1.561.340,70 E. Open-end undertakings for collective investment 19.278.108,91 -28.002.759,00 F. Derivative financial instruments a) Bonds Futures and forward contracts 987.757,71 l) Financial indices Option contracts 66.448,38 Futures and forward contracts 901.521,44 -7.381.569,19 m) Derivative financial instruments Swap contracts (+/-) -1.753.220,69 2.676.311,04 G. Receivables, deposits, cash at bank and in hand
and payables -0,04 -1,06
H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts 37.611,60 -28.965,47 Swap contracts (+/-) -0,78 b) Other foreign exchange positions and
transactions -30.064.810,63 -6.092.171,93
II. Investment income and expenses A. Dividends 119.437.956,70 93.740.855,74 B. Interests a) Securities and money market instruments 5.268.825,91 2.949.549,12 b) Cash at bank and in hand and deposits 349.756,86 478.814,76 c) Collateral (+/-) -3.835,64 C. Interest on borrowings (-) -153.661,50 -297.448,12
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
14.794.529,70 1.235.940,16
B. Other 2.172.997,05
IV. Operating expenses A. Investment transaction and delivery costs (-) -14.865.543,97 -12.095.566,15 B. Financial expenses (-) -58.141,19 -312.493,70 C. Custodian's fee (-) -2.283.399,64 -3.409.135,19 D. Manager's fee (-) a) Financial management -60.619.495,01 -50.009.267,58 b) Administration and accounting management -4.516.749,43 -3.658.129,48 E. Administrative expenses (-) -10.165,76 -9.515,40 F. Formation and organisation expenses (-) -363.586,04 -1.610.996,58 G. Remuneration, social security charges and
pension -344,80 -869,56
H. Services and sundry goods (-) -737.624,02 -867.669,24 J. Taxes -1.363.690,82 -1.376.821,53 K. Other expenses (-) -2.769.284,92 -2.229.647,06
Income and expenditure for the period Subtotal II + III + IV 52.109.382,06 24.696.761,58
V. Profit (loss) on ordinary activities before tax 482.568.162,47 -498.239.078,17
VII. Result for the period 482.568.162,47 -498.239.078,17
Appropriation Account 31/12/2012 (in the currency of the bevek)
31/12/2011 (in the currency of the bevek)
I. Profit to be appropriated 1.279.281.970,46 818.423.978,74 Profit (loss) brought forward from the previous
financial year 797.776.725,06 1.339.153.804,96
Profit for the period available for appropriation 482.568.162,47 -498.239.078,17 Income on the creation of shares (income on the
cancellation of shares) -1.062.917,07 -22.490.748,07
II. (Appropriations to) Deductions from capital -1.276.705.394,68 21.049.689,40
III. Profit (loss) to be carried forward 848.448.894,69
IV. (Dividends to be paid out) -2.576.575,79 -2.696.054,97
1.6 SUMMARY OF RECOGNITION AND VALUATION RULES
1.6.1 SUMMARY OF THE RULES Summary of the valuation rules pursuant to the Royal Decree of 10 November 2006 on the accounting, annual accounts and periodic reports of certain open-ended undertakings for collective investment. The assets of the various sub-funds are valued as follows:
When purchased or sold, securities, money market instruments, units in undertakings for collective investment and financial derivatives are recorded in the accounts at their acquisition price or sale price, respectively. Any additional expenses, such as trading and delivery costs, are charged directly to the profit and loss account.
After initial recognition, securities, money market instruments and financial derivatives are measured at fair value on the basis of the following rules:
o Securities that are traded on an active market without the involvement of third-party financial institutions are measured at fair value using the closing price;
o Assets that have an active market which functions through third-party financial institutions that guarantee continuous bid and ask prices are measured using the current bid price set on that market. However, since most international benchmarks use mid-prices, and the data providers cannot supply bid prices (e.g., JP Morgan, iBoxx, MSCI, etc.), the mid-prices are used to measure debt instruments, as provided for in the Notes to the aforementioned Royal Decree. The method to correct these mid-prices and generate the bid price is not used, as it is not reliable enough and could result in major fluctuations.
o Securities whose last known price is not representative and securities that are not admitted to official listing or admitted to another organised market are valued as follows: When measuring these securities at fair value, use is made of the current fair value
of similar assets for which there is an active market, provided this fair value is adjusted to take account of the differences between the assets concerned.
If no fair value for similar assets exists, the fair value is calculated on the basis of other valuation techniques which make maximum use of market data, which are consistent with generally accepted economic methods and which are verified and tested on a regular basis.
If no organised or unofficial market exists for the assets being valued, account is also taken of the uncertain character of these assets, based on the risk that the counterparties involved might not meet their obligations.
o Shares for which there is no organised or unofficial market, and whose fair value cannot be calculated reliably as set out above, are measured at cost. Impairment is applied to these shares if there are objective instructions to this end.
o Units in undertakings for collective investment (for which there is no organised market) are measured at fair value using their last net asset value.
Liquid assets, including assets on demand at credit institutions, obligations on current account vis-à-vis credit institutions, amounts payable and receivable in the short term that are not represented by negotiable securities or money market instruments (other than vis-à-vis credit institutions), tax assets and liabilities, are measured at nominal value. Other amounts receivable in the longer term that are not represented by negotiable securities are measured at fair value. Impairment is applied to assets, amounts to be received and receivables if there is uncertainty that they will be paid in full or in part at maturity, or if the realisation value of this asset is less than its acquisition value. Additional impairment is recorded on the assets, amounts to be received and receivables referred to in the previous paragraph to ensure that any change in their value, or risks inherent in the asset in question, are taken into account.
The income arising from securities lending is recognised as the lending rate and is included on an accruals basis in the profit and loss account over the term of the transaction.
Securities issued in a currency other than that of the relevant sub-fund are converted into the currency of the sub-fund at the last known mid-market exchange rate.
DIFFERENCES A minor difference may appear from time to time between the net asset value as published in the press and the net asset value shown in this report. These are minimal differences in the net asset value calculated that are identified after publication. If these differences reach or exceed a certain tolerance limit, the difference will be compensated. For those buying or selling shares in the bevek and for the bevek itself, this tolerance limit will be a certain percentage of the net asset value and the net assets, respectively. This tolerance limit is: money market funds: 0.25% bond funds, balanced funds and funds offering a capital guarantee: 0.50% equity funds: 1% other funds (real estate funds, etc.): 0.50%
Given that a number of securities exchanges were closed on 31 December 2012 and that the sub-funds below invested more than 20% of their assets in securities listed on these exchanges, the asset valuations used in the financial statements of the sub-funds concerned were made on 28 December 2012 instead of 31 December 2012. However, a theoretic net asset value was calculated for these sub-funds as at 31 December 2012 that was not used for entry and exit. Sub-funds concerned:
Belgium
BRIC
Buyback Europe
Central Europe
Commodities & Materials
Consumer Durables
CSOB Akciovy Fond Dividendovych Firem
CSOB BRIC
Eastern Europe
Euro Cyclicals
Euro Finance
Euro Non Cyclicals
Euro Telecom & Technology
Europe
Eurozone
Fallen Angels
Finance
Flanders
Food & Personal Products
Global Leaders
Growth by Innovation
High Dividend
High Dividend Eurozone
High Dividend New Markets
Industrials & Infrastructure
Japan
Latin America
Luxury & Tourism
Medical Technologies
Millennium
New Asia
New Markets
New Shares
Oil
Pacific
Pharma
Pharma Growth
Quant EMU
Quant Europe
Quant Global 1
Satellites
SRI Equity
Technology
Telecom
Utilities
World
1.6.2 EXCHANGE RATES
1 EUR =
31/12/2012 31/12/2011
6,4813 ARS 5,5873 ARS
1,2699 AUD 1,2662 AUD
1,9557 BGN 1,9561 BGN
2,6995 BRL 2,4214 BRL
1,3127 CAD 1,32185 CAD
1,2068 CHF 1,2139 CHF
2.329,61 COP 2.516,46 COP
25,096 CZK 25,503 CZK
7,461 DKK 7,4324 DKK
1,00 EUR 1,00 EUR
0,8111 GBP 0,8353 GBP
10,2187 HKD 10,0822 HKD
7,5482 HRK 7,5196 HRK
291,22 HUF 314,77 HUF
12.706,10 IDR 11.771,00 IDR
4,9191 ILS 4,9638 ILS
72,2352 INR 68,9383 INR
114,00 JPY 99,88 JPY
1.411,45 KRW 1.495,47 KRW
11,1533 MAD 11,1269 MAD
17,1208 MXN 18,1162 MXN
4,0317 MYR 4,1152 MYR
7,3372 NOK 7,7473 NOK
1,5981 NZD 1,6641 NZD
54,1368 PHP 56,9304 PHP
4,0803 PLN 4,4578 PLN
4,4455 RON 4,3255 RON
8,5768 SEK 8,8993 SEK
1,6105 SGD 1,6833 SGD
40,3299 THB 40,9567 THB
2,353 TRY 2,4517 TRY
38,285 TWD 39,3067 TWD
1,3184 USD 1,2982 USD
99.999,00 VEF 99.999,00 VEF
11,1858 ZAR 10,4805 ZAR
SOFT COMMISSIONS The Manager has entered into a Commission Sharing Agreement with one or more brokers for transactions in shares on behalf of one or more sub-funds. This agreement specifically concerns the execution of orders and the delivery of research reports. What the Commission Sharing Agreement entails The Manager can ask the broker to pay invoices on its behalf for a number of goods and services provided. The broker will then pay those invoices up to a certain percentage of the gross commission that it receives from the sub-funds for carrying out transactions (specified below under ‘CSA Credits’). N.B.: Only goods and services that assist the manager in managing the sub-funds in the interest of the bevek can be covered by a Commission Sharing Agreement. Goods and services eligible for a Commission Sharing Agreement: Research and advisory services Portfolio valuation and analysis Performance measurement Market price services Computer hardware associated with specialised computer software or research services Dedicated telephone lines Seminar fees, where the subject matter is of relevance to the provision of investment services Publications, where the subject matter is of relevance to the provision of investment services.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 1,572,717 944,875 60.08%
CSFBSAS 1,089,596 624,565 57.32%
DEUTSCHE 516,178 295,014 57.15%
EQ CSA MACQUARIE 209,339 127,350 60.83%
HSBC 83,786 33,948 40.52%
JP MORGAN 295,187 183,505 62.17%
MERRILL 562,000 336,443 59.87%
MORGAN STANLEY 991,636 594,100 59.91%
NOMURA 1,523,411 871,477 57.21%
SOCGEN 22,912 10,952 47.80%
UBSWDR 1,244,252 737,328 59.26%
WOOD 26,741 6,122 22.89%
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Buyback Europe
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND BUYBACK EUROPE
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 30 June 2000 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 459.08 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED A least 75% of the assets are invested in shares of European companies with a policy of share buy-backs. More specifically, this involves companies whose buy-back policy may be considered as an indicator of a capital gain on the investment in the short or medium term.
RISK CONCENTRATION Shares of European companies with a policy of share buy-backs.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR KBC Equity Fund Buyback Europe invests in European stocks that buy back their own shares. Research has shown that companies that buy back their own shares, for valuation reasons, tend to outperform their peers over a 3-4 year period. The fund therefore adopts a buy and hold strategy for that period. The fund aims at sector and region neutrality, in order to avoid unintended sector/regional bets and is measured against the MSCI Europe Index.
Equity markets moved considerably higher at the start of 2012. The Fed’s announcement that rates will remain low until at least late 2014, record results from Apple and positive US GDP growth numbers were the key support factors for equity markets. It was not all good news however, as major French banks were downgraded and concerns about the Greek ‘private’ debt restructuring continued to prevail. Into February and after a short pause, markets climbed higher again in the second half of the month. Regionally, the euro area markets strongly outperformed with investors becoming convinced that after two years of crisis, the region has succeeded in isolating the Greek question. The risks of severe damage to the European economy as a whole and for the financial sector in particular fell sharply. Towards the end of the first quarter, positive macroeconomic developments, especially in the US, the successful Greek debt restructuring and the liquidity injection by central banks drove equity markets modestly higher in March. Towards the end of the month, investors’ optimism was tempered by worries over the risks for a hard landing in China and the rise in government bond yields throughout the world. The beginning of the second quarter saw a global pullback on equity markets, prompted by a slowdown in Chinese growth to its lowest level since Q2 2009, poor EU and US economic data and confirmation that the UK and Spain had slide back into recession. The European debt crisis flared up again as yields surged on Spanish bonds, the Dutch government resigned and the Presidential election in France lead to much political uncertainty. Euro area concerns escalated in May as Greek exit fears rose after elections in the country produced a stalemate and the country was unable to form a government. Statements from various European officials alluding to the fact that an exit scenario had been discussed sent markets into a tailspin. Sentiment was further hit when periphery yields spiked after Spain partially nationalized Bankia, Spain’s second largest mortgage lender. As the end of the second quarter approached, Equity markets surged on the final trading day of the June after unexpected policy responses from the EU Summit, involving an agreement to use the ESM to recapitalise banks directly and take steps towards banking union soothed market nerves and increased appetite for risk assets. Victory for the pro-EU/Bailout New Democrats in Greece also supported markets. Into the second half of the year main market developments for the quarter saw Central Banks around the world implementing a new round of monetary easing in July to avoid a slide into a fresh recession. The ECB cut each of its key rates by 25 bps, bringing the main refi rate to 0.75% - a record low and the deposit rate to 0%. Later in the month, Draghi’s comments that the “Euro is irreversible” and that the ECB will do whatever it takes to preserve the currency sparked a month-end rally in stocks globally. In the UK, the Bank of England implemented an additional GBP 50 billion of QE while in China, the PBOC cut deposit and lending rates to 3% and 6% respectively. The equity rally ran out of steam in August amid holiday season in Europe and the U.S, with little news or market developments to influence sentiment. In the US, unemployment figures continued to worsen. The Fed’s chief Bernanke hinted that the Fed was willing to provide additional policy stimulus in the near term in order to ‘promote a stronger economic recovery and sustained improvement in labour market conditions’. Overall data releases from China were weak with declining exports, industrial production and manufacturing figures. Global markets had a positive month towards quarter-end buoyed by the ECB decision to allow unlimited purchasing of short-dated bonds (under the Outright Monetary Transactions operation), of countries who have entered fiscal adjustment programmes. Following this, the German court’s decision to back the EU bailout and the announcement from the Fed that it was introducing QE3 boosted investor confidence and lead markets to rally. Into the final quarter of the year and main market developments saw consumer spending, confidence and housing indicators in the U.S remain largely positive, while in Europe the ECB left its main interest rate unchanged at 0.75%. Towards quarter-end the FOMC expanded QE in the US, by adding at additional $45 billion per month of open-ended Treasury security purchases, while the fiscal cliff has been averted by a last minute deal, but with no agreement on the debt ceiling it is likely that this issue will return in the near future. The EU approved the disbursement of the next tranche of Greek aid. The region’s stock markets were buoyed towards the end of the quarter as perceptions grew that the debt crisis had stabilized somewhat. The first half of the year was a relatively positive period for KBC Equity Fund Buyback Europe, with the fund ending the period positively in absolute just lagging slightly the broad index of European stocks. In the first quarter the fund ended in positive territory on an absolute basis and broadly in line compared to the index of European stocks. The Banking sector proved to be the biggest contributor to positive performance lifted by the names such as KBC Groupe and Erste Groupe. The sector that was the biggest detractor to performance over the period was the Energy sector with the fund’s overweight in Total and the fund’s exclusion of Transocean the main reasons for underperformance within the sector. The second quarter was marked with high volatility and a decline in markets globally. While the fund shared this decline it did not lag far behind the index. The negative performance during the quarter was attributed to the Media sector, where much of the underperformance was derived from Mediaset and Television Francaise, significantly down over the period on disappointing Quarter 1 results. Some of the poor performance was offset by the good performance of the Telecommunications sector where the fund’s overweight in Vodafone and underweight in Telefonica played to the advantage of the fund. On an individual stock level, Astrazenica, the largest weight relative to the Benchmark was the best performing stock, while Nokia was a notable underperformer, after announcing in late Q2 that it would be seeking to cut 10,000 jobs worldwide in an attempt to cut costs.
Into the second half of the year and stock selection was the key contributor to positive performance in the third quarter. On a Sector level, the best performing sector was Materials (10% of the fund), largely down to the fund’s overweight position in BASF SE, one of the fund’s larger weighted stocks, which rose from EUR 54.70 to EUR 65.65 in the quarter. This was mainly on the back of analyst upgrades amid rising sales growth forecasts for the chemicals sector. The Banking sector (8% of the fund) performed well within the fund, with positive performance driven by the fund’s overweight in Skandinaviska Enskilda, which rose from SEK44.76 to SEK55 in the quarter after second-quarter profits beat analysts’ estimates. The Automobiles & Components sector (3% of the fund), followed by the Capital Goods sector (7% of the fund) were the main underperformers for the fund in the quarter. Within Automobiles, BMW’s slight underperformance, coupled with the fund’s overweight position versus the benchmark detracted from performance. On a Regional level Rest of Europe, performed the best and contributed most to performance. In the final quarter of the year currency movements were the key contributor to positive performance, while Stock selection was the biggest detractor. On a Sector level, the best performing sector was Materials (8.5% of the fund), largely down to the fund’s overweight position in Koninklijke DSM which rose from EUR 38.80 to EUR 45.79 in the quarter. The Dutch-based company completed a number of strategic acquisitions such as Fortitech and Cargill’s Cultures and Enzymes business in the quarter, news which was taken positively by the markets. The Energy sector (11% of the fund) also performed well within the fund during the quarter, with stock selection a key contributor. The Fund’s underweight in BG Group whose NAV dropped from GBP 12.50 to GBP 10.12 and overweight in Total SA whose NAV rose from EUR 38.60 to EUR 39.01 were the main overriding factors in this. The Pharmaceuticals sector (10% of the fund), followed by the Telecommunications sector (6.5% of the fund) were the main underperformers for the fund in the quarter. Within Pharmaceuticals, underperformance was driven mainly by the fund’s overweight position in H Lundbeck, which declined from DKK107.80 to DKK82.90 after the company reduced its sales and profit forecasts for the next two years. Within Telecommunications, the main detractor was the fund’s overweight in France Telecom for the second quarter in succession, which underperformed the market, declining from EUR9.388.to EUR 8.339 On a Regional level and while the fund does not take any unintended bets between the Eurozone and the Rest of Europe, it was the former that performed the best and contributed most to performance over the quarter. So overall, while markets were very volatile during 2012, the KBC Equity Fund Buyback Europe, the fund performed positively on an absolute basis recording a double digit rise in its NAV. This was in the context of small but positive gains in the first half of the year and a very strong rally in the second half of the year. In relative terms for the year the fund lagged the Benchmark after taking account of costs.
2.1.8 FUTURE POLICY In Europe, while buyback activity in absolute terms is circa one seventh of where it was in 2007, the macro environment is becoming more conducive to buybacks. The current environment is one where there is lots of cash but little confidence. Recent trends suggest that ultra low interest rates available on fixed income assets is fuelling demand for stocks that are returning cash to the investor. High EPS yields and low bond yields, present an opportunity for companies to shift their capital structure as debt capital is significantly cheaper while low interest rates are incentivising corporates to borrow money in the credit markets to buy back their own shares. Furthermore, the continuing struggles of the European economy support the belief that the current environment is not one conducive to M& A or large-scale capex, which is at an 18-year low, in the absence of return-worthy projects, while policy intervention has firmed the belief that liquidity will remain cheap for the foreseeable future. Given this, I would not be surprised to see an uptick in buyback activity for the remainder of the year. In line with the theme, KBC Equity Fund Buyback Europe will continue to invest in a portfolio of European shares that are buying back their own shares with the intention to create shareholder value. We will continue to ensure that the portfolio is diversified, with region and sector allocation in line with the MSCI Europe Index.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 87.441.847,74 84.898.017,65
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 474.456,00 561.667,50 a} Collateral received in the form of bonds 1.422.950,56 1.942.461,81 C. Shares and similar instruments a) Shares 86.516.386,90 83.808.994,91 Of which securities lent 1.299.110,11 2.060.983,80 D. Other securities 12,22 16.374,88 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -754,92 -248,78 m) Financial indices Futures and forward contracts (+/-) -1.382,45 47.714,94
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 26.586,36 7.385.518,28 b) Tax assets 12.671,42 14.636,05 c) Collateral 21.853,39 1.002.246,27 B. Payables a) Accounts payable (-) -92.603,34 -7.391.456,55 d) Collateral (-) -1.422.950,56 -1.942.461,81
V. Deposits and cash at bank and in hand A. Demand balances at banks 553.224,94 -618.956,10
VI. Accruals and deferrals A. Expense to be carried forward 4.813,01 B. Accrued income 55.061,01 193.490,90 C. Accrued expense (-) -123.663,79 -126.777,66
TOTAL SHAREHOLDERS' EQUITY 87.441.847,74 84.898.017,65
A. Capital 70.448.630,09 80.579.222,66
B. Income equalization -128.172,78 -1.370.669,41
C. Profit(Loss) carried forward 4.088.505,13 31.299.342,98
D. Result for the period 13.032.885,30 -25.609.878,58
I.A.B Cash at bank and in hand/deposits 21.853,39 1.002.246,27
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 785.041,60 13.046.300,78
IX Financial instruments lent 1.299.110,11 2.060.983,80
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -87.211,50 636,00 C. Shares and similar instruments a) Shares 9.804.485,92 -30.118.731,51 D. Other securities -38.260,39 4.649,21 F. Derivative financial instruments l) Financial indices Futures and forward contracts 387.560,61 47.714,94 H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -506,14 -248,78 b) Other foreign exchange positions and
transactions 1.377.001,12 2.181.432,61
II. Investment income and expenses A. Dividends 2.992.997,23 4.638.790,52 B. Interests a) Securities and money market instruments 174.746,04 118.704,62 b) Cash at bank and in hand and deposits 14.982,92 6.650,99 C. Interest on borrowings (-) -3.579,30 -4.914,43
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
255.988,30 13.077,67
B. Other 8.288,95
IV. Operating expenses A. Investment transaction and delivery costs (-) -345.843,07 -446.324,84 B. Financial expenses (-) -1.262,91 -2.978,79 C. Custodian's fee (-) -72.212,53 -97.344,49 D. Manager's fee (-) a) Financial management Classic Shares -873.258,48 -1.656.770,90 Institutional B Shares -349.541,31 -24.689,93 b) Administration and accounting management -87.958,23 -124.130,51 E. Administrative expenses (-) -962,57 -459,81 F. Formation and organisation expenses (-) -7.059,73 -13.609,84 G. Remuneration, social security charges and
pension -6,67 -28,87
H. Services and sundry goods (-) -15.461,51 -27.453,64 J. Taxes Classic Shares -49.225,81 -70.388,19 Institutional B Shares -3.391,45 9.254,60 K. Other expenses (-) -39.135,24 -51.004,16
Income and expenditure for the period Subtotal II + III + IV 1.589.815,68 2.274.668,95
V. Profit (loss) on ordinary activities before tax 13.032.885,30 -25.609.878,58
VII. Result for the period 13.032.885,30 -25.609.878,58
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 16.993.217,65 4.318.794,99 Profit (loss) brought forward from the previous
financial year 4.088.505,13 31.299.342,98
Profit for the period available for appropriation 13.032.885,30 -25.609.878,58 Income on the creation of shares (income on the
cancellation of shares) -128.172,78 -1.370.669,41
II. (Appropriations to) Deductions from capital -16.801.606,41
III. Profit (loss) to be carried forward 4.088.505,13
IV. (Dividends to be paid out) -191.611,24 -230.289,86
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND BUYBACK EUROPE
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND BUYBACK EUROPE
(IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 63.872.018,98 45.593.563,16 109.465.582,14 Sales 68.403.378,86 49.880.259,96 118.283.638,82 Total 1 132.275.397,84 95.473.823,12 227.749.220,96 Subscriptions 45.864.430,21 24.221.398,15 70.085.828,36 Redemptions 51.809.798,13 28.278.100,73 80.087.898,86 Total 2 97.674.228,34 52.499.498,88 150.173.727,22 Monthly average of total assets
91.447.562,40 85.673.905,29 88.501.818,98
Turnover rate 37,84 % 50,16 % 87,65 %
1st half of year 2nd half of year YearPurchases 63.872.018,98 45.593.563,16 109.465.582,14 Sales 68.403.378,86 49.880.259,96 118.283.638,82 Total 1 132.275.397,84 95.473.823,12 227.749.220,96 Subscriptions 45.864.430,21 24.221.398,15 70.085.828,36 Redemptions 51.809.798,13 28.278.100,73 80.087.898,86 Total 2 97.674.228,34 52.499.498,88 150.173.727,22 Monthly average of total assets
89.854.496,47 84.725.216,36 87.210.511,00
Corrected turnover rate 38,51 % 50,72 % 88,95 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
Capitalization Distribution Capitalization Distribution
2011 - 12 19.913.918,27 337.025,89
2012 - 12 66.303.046,99 63.105.475,20
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 20.603.514,06 512,08
2012 - 12 27.254.589,05 594,91
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0174407016 EUR 15.87% 4.27% -3.76% 0.0489 30/06/2000 1.37%
DIV BE0174406976 EUR 15.84% 4.27% -3.76% 0.0488 30/06/2000 1.36%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228537708 EUR 15.86% 24/11/2011 26.17%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 6.14 EUR net (8.19 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.738% Classic Shares Capitalization: 1.734% Institutional B Shares Capitalization: 1.728% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 24,919 14,867 59.66%
CSFBSAS 26,922 15,669 58.20%
DEUTSCHE 33,507 19,986 59.65%
HSBC 17 9 50.01%
JP MORGAN 15,082 9,427 62.50%
MERRILL 5,770 3,382 58.61%
MORGAN STANLEY 6,284 3,490 55.53%
NOMURA 14,324 8,680 60.59%
UBSWDR 34,766 22,964 66.05%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The Euro Stoxx 50 is a weighted equity index computed by Stoxx Ltd. The dividend is not reinvested. The main purpose of this index is to provide a continuous indication of market trends on the European stock markets. The base value of the index is 1000, calculated on the basis of the underlying prices recorded on 31 December 1991. The Euro Stoxx 50 consists solely of shares from countries participating in the Economic and Monetary Union, with the exception of Luxembourg. On 10 April 1998, the following stock exchanges were included in the index: Austria (Vienna), Belgium (Brussels), Finland (Helsinki), France (Paris), Germany (Frankfurt), Italy (Milan), Ireland (Dublin), the Netherlands (Amsterdam), Portugal (Lisbon) and Spain (Madrid). The index consists of the 50 largest European shares in terms of shares that are freely negotiable, and the shares are accordingly weighted on the basis of this criterion. The Euro Stoxx 50 is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Stoxx Limited has all proprietary rights with repect to the index. In no way Stoxx Limited endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Stoxx Limited disclaims any liability for the issue and offering of the shares of this undertaking for collective investment.
The FTSE 100 is an equity index computed by the Financial Times Ltd. The dividend is not reinvested. It comprises 100 shares. The FTSE 100 serves primarily as a continuous indicator of market trends on the UK stock market. The value of the FTSE 100 is based on the market value of the shares of 100 companies listed on the London Stock Exchange. These are the companies with the biggest market capitalisation, and the shares are weighted accordingly. The base value of the index is 1000, calculated on the basis of the underlying prices recorded on 3 January 1984. The FTSE 100 is published daily in the leading financial newspapers, i.e. The Financial Times and The Wall Street Journal Europe. In Belgium, the index is published in De Tijd and L’Echo. Financial Times Ltd has all proprietary rights with repect to the index. In no way Financial Times Ltd endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Financial Times Ltd disclaims any liability for the issue and offering of the shares of this undertaking for collective investment. The Swiss Market Index is a capitalization-weighted index of the largest and most liquid stocks traded on the Electronic Bourse System. The equities use free float shares in the index calculation. The SMI was developed with a base value of 1500 as of June 30, 1988. The Swiss Market Index is published daily in the leading financial newspapers, i.e. The Financial Times and The Wall Street Journal Europe. In Belgium, the index is published in De Tijd and L’Echo. The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 58.377,10 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
GN-GREAT NORDIC LTD DKK 5.000 81,800 54.818,39
NOKIA CORP -A- EUR 124.112 2,926 363.151,71
PIRELLI E CO EUR 29.000 8,655 250.995,00
SUBSEA 7 SA NOK 35.000 132,100 630.145,01
Total 1.299.110,11
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 120.000 EUR 146.616,48
FRANCE 2004 1,60% 25/07/2015 EUR 33.000 EUR 42.405,07
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 5.000 EUR 5.602,57
FRANCE - 08/14 3.00% 12/07 EUR 191.000 EUR 202.366,79
NEDERLAND 2007 4,50% 15/07/17 EUR 852.000 EUR 1.025.959,66
Total 1.422.950,57 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund BRIC
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND BRIC
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 24 May 2006 Initial subscription price: 1000 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED The sub-fund invests primarily, directly or indirectly, in shares of companies from different sectors in Brazil, Russia, India and China.
RISK CONCENTRATION Shares of Brazilian, Russian, Indian and Chinese companies.
PRIMARILY INVESTMENTS IN ASSETS OTHER THAN SECURITIES OR MONEY MARKET INSTRUMENTS Under the investment policy referred to above, the sub-fund may invest primarily in permitted assets other than securities or money market instruments, more specific units in UCIs.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive.
A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR The KBC Equity Fund BRIC fund invests directly and indirectly in the following developing economies which make up the BRIC acronym: Brazil, Russia, India and China. The Equity Fund BRIC starts the investment process in these markets by following the MSCI BRIC breakdown: Brazil 29%, Russia 14%, India 15% and China 42%, and then applying any country preferences. The fund finished the year with a positive return but underperformed its benchmark, MSCI BRIC. Over the first half of the 2012, the changing situation in Europe was the primary concern for investors who were in a risk-on, risk-off mode depending primarily on the Eurozone developments. Throughout the first quarter, the situation in Europe continued to improve and markets performed strongly. Investors accepted Greek sovereign debt swap offer and the European Central Bank provided support to troubled European banks. Economists were of opinion that China, the most important trading partner for Brazil and receiver of its commodities-based exports, will experience a slowdown in growth but short of outright recession. Global situation worsened in the second quarter of the year. In France, anti-austerity measures of a newly elected president were in opposition to the so-far dominating view advocated by German Chancellor Angela Merkel and resulted in a widening of an already existing rift in European policy. Investors were concerned that Greece, following local parliamentary elections, may leave with the Eurozone and return to its old currency, the drachma and cause an uncontrolled breakup of the European Monetary Union. Contagion fears spread to another weak link in a European chain – Spain. Its macroeconomic numbers continued to disappoint and Madrid was forced to ask for a bailout as costs of financing in capital markets were too high. Political issues were not the only force behind declines in equities. First half of the year saw a substantial deterioration in macro data globally – not only in Europe that remained in the spotlight, but also in the US and China. As a consequence, markets were very weak and in a risk-off mode, with most risk assets reversing the gains achieved in first months of the year.
At the start of the second half of the year, markets moved considerably upwards although the start of the third quarter brought even more disappointing macroeconomic news. The US growth forecast was downgraded and problems in the Eurozone continued. The equity rally gained momentum towards the end of the summer on anticipation that central banks worldwide, and an American monetary authority in particular, will start a new round of monetary easing. The expectations proved to be true when the US Fed announced QE3 in September, along with the aim of keeping interest rates low until at least the middle of 2015. In the final quarter of the year, markets gained some positive momentum in its final months on the expectation that a political resolution of ‘fiscal cliff’ issue in the United States would be found and cuts in spending and increases in taxes, which would likely prompt the US into recession, would be avoided. Other main news over the period were successful leadership transition in China and elections in Japan. On the economic front in Brazil, economic activity substantially let down in 2012. At the start of the year, market watchers were quite upbeat about prospects for Latin America’s largest economy and expected GDP growth to come in at 3.4% for the full year. However, economic data continued to come in below expectations, the awaited economic recovery failed to materialise and GDP forecasts had to be revised down accordingly. The most recent forecast for 2012 GDP growth is a lacklustre 1%. On a monetary policy front, the interest rate, the Selic, finished year at 7.25%, an all-time historic low, down from 11% at the start of the year. The slowdown in economic activity was recognised early by the Brazilian Central Bank which proved to be very proactive in their monetary response and the interest rate has been decreased by a total of 500 basis points since the summer of 2011. However, interest rate cuts and substantial pro-cyclical fiscal policy promoted by the Brazilian government failed to have a substantial and lasting impact on Brazilian economy, reinforcing the opinion that recent deterioration in economic activity is not short-term, cyclical and driven by global macroeconomic factors and but rather of more structural, domestic and long-term nature. After starting the year strongly, the Russian economic growth decelerated and external risks were rising. Despite the slowdown in economic activity in 2012, the Russian economy was fairly solid. Economic growth decelerated to 2.9 % YoY in the third quarter from 4.8 % YoY in 4Q11 but the GDP growth for the entire year should be between 3.5 % - 4 %, thus slightly lower than the year before (4.3 % in 2011). Growth was mainly driven by consumer activity, service sector expansion and some manufacturing efficiency gains rather than by extractive industries. The inflation rate reached all-time low in April when it was only 3.6 % YoY, mainly due to tariff hikes postponement. However, from July inflation was on the rise as tariffs were raised and food prices soared due to bad harvest. It should end the year around 6.5 %. The unemployment rate decreased to 5.2 % in August and reached the lowest level in modern Russian history. Surprisingly the Russian stock market did not perform as well as expected given the strong economic growth and high average oil prices. International investors were held back given a series of long term negative factors such as high corruption and poor corporate governance as well as strong national protests against Putin’s establishment. The Indian market kicked off the year strongly outperforming the region on the back of the Central Bank signaling that it would follow a monetary easing strategy. However from end February to end May Indian equities pulled back strongly in the face of multiple headwinds including: 1) a distracted Government due to political turmoil, following a series of corruption exposes, 2) poor economic data coupled with stubbornly high inflation limiting the RBI’s ability to ease monetary policy, 3) stubbornly high global crude oil prices, putting added pressure on India’s already strained fiscal position, 4) the proposal to address tax avoidance through the introduction of General Anti Avoidance Rule (GAAR), 5) India's governing National Congress party suffering major setbacks in the five state elections 6) S&P downgrade of India's outlook to "negative” and 7) global risk aversion in the face of an uncertain global macro environment due to slowing growth and the European crisis. The second half of the year kicked off with a major cabinet reshuffle and Pranab Mukherjee was elected as the next President of India and Chidambaram Palaniappan staged a comeback as the Finance Minister. The turning point for the market came in September on the back of unexpected reform measure announced by the government, including diesel price hikes, an increased FDI limit across a number of areas and a number of important cabinet approvals passed to name a few. Rainfall also picked up over the month easing concerns surrounding the impact a deficient monsoon would have on agri-production. This together with positive developments in economic numbers combined to support investor sentiment. The rally gained further traction in the last quarter of 2012 with the government announcing the increase in FII limits for Rupee denominated government and corporate bonds and securing the vote of FDI in multi-brand retail.
China went against the global trend in April, rising sharply and despite falling in May and June, the domestic market ended the first half of the year slightly ahead of international indices. While the volatility globally continued, there was also concern domestically about weakening growth in China over the first half of 2012. Growth was slower than most expected, with the official growth target being lowered to 7.5%. Most domestic activity metrics were weak – industrial production, investment and retail sales. On the positive side, inflation continued to fall, leaving room for policy makers to make changes if needed. While there was some slowdown in employment growth, there was no mass unemployment as was seen in 2008/2009. Following this slowdown, Chinese authorities began to take steps to boost growth. Initially the focus was on increasing investment, with particular focus on water and other environmental areas, utilities, railways and social housing. However at the beginning of June, the People’s Bank of China took the decision to lower lending and deposit rates by 25bps. They also took steps to liberalise the interest rate regime, seen as a significant positive. In September macroeconomic releases from China were showing a turnaround. Industrial production, retail sales and fixed investment all started to show signs of stabilization over the fourth quarter, lessening worries that the Chinese economy was experiencing a hard landing. On the political front, over the quarter, we saw the completion of a successful leadership transition in the country and while it will be 2013 before the leadership takes action on most items, the transition was completed smoothly which was a positive for the market. While the Chinese news was a significant driver of the region over the period, international factors continued to influence sentiment positively.
2.1.8 FUTURE POLICY Looking forward, we believe that 2013 will be a year of sluggish and weak growth for the overall global economy. While global growth is expected to be positive it is not anticipated that it will be much more positive when compared to 2012. Developed markets are being highlighted as the point of weakness with only modest expansion expected. The ongoing fiscal crisis in the Eurozone is expected to continue its negative influence on global growth. Despite the European Central Bank’s efforts to control and address the crisis, Europe remains in an unstable condition. Economic releases for the Eurozone countries are not supportive with overall GDP figures expected to continue their decline in 2013. A second cause of concern is the fiscal restructuring as a result of the credit crisis that remains, almost 5 years on, for both the US and Eurozone. Household incomes and corporate and financial sector rebalancing is expected to continue hindering consumption growth in these regions. The fiscal austerity that is being forced upon consumers is making stable domestic growth for many countries virtually impossible. While a political crisis has been averted in the US after a last minute agreement regarding the fiscal cliff, this may only a short term solution in advance of the debt ceiling debate to follow in February. Inflation is expected to remain contained in developed markets this year allowing monetary policy to focus on growth. In the US, growth is predicted to improve in the second half of the year along with improvement in the housing market and unemployment figures. It would appear that growth in 2013 will emanate from the same source as 2012, with almost 90% of global GDP growth expected to originate from Emerging Markets. Growth is also expected to continue in China where considerable confidence remains, however it is not expected to surpass the growth of 2012.
In relation to the BRIC countries: in Brazil there are some signs that economy is turning the corner as industrial business confidence improved in a final quarter of 2012. Household spending, one of the pillars of economic growth in 2012, is expected to remain strong as consumer confidence rose to a level close to its historical peak. Labour market conditions tightened even more and continue to defy Brazil’s disappointing economic reality. The unemployment is 4.9% at the end of the year, the second lowest in the series. Together with a 9% increase to a minimum wage, it is expected to provide an additional boost to a household consumption that is already growing at a healthy rate. However, the growth in labour’s productivity remains disappointing and heated labour market conditions are likely to translate into inflationary pressures in 2013. Russia is currently in a unique position as the economy is growing relatively fast, has no debt problems and operates in an environment of positive real interest rates. The major factor for the Russian market is an oil price. We expect the price for the year 2013 to stay around current levels with upside risks given rising tensions in the Middle East. The biggest short- to mid-term risks for Russia remain to be the debt situation in Europe and economic recovery in China. We remain constructive on Indian equities in 2013. The market is well positioned gain support from further monetary easing, an improving policy environment, as evidenced in a series of announcements from the government over the last number of months, and a bottoming out of economic growth early in 2013. A substantial political calendar however implies potential equity market volatility. With a backdrop of weak global growth domestic demand led economies such as India stand out. In addition, lower global growth tends to translate into lower commodity prices which not only helps lower inflation but anchor inflation expectations. Growth in China has slowed down in recent years and that the outlook now is for a lower level of growth than was achieved before. However we expect that policy makers will avoid a hard landing and will provide support to the market. The new leadership will announce their policy changes during the course of 2013 and this has the potential to drive the market further. We believe that the impact of loosening announced in 2012 as well as additional investment in infrastructure will support growth looking into 2013.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 63.172.577,39 62.389.722,80
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 279.899,20 331.348,50 a} Collateral received in the form of bonds 1.754.444,93 3.395.203,27 C. Shares and similar instruments a) Shares 27.993.881,19 26.469.548,10 Of which securities lent 1.624.700,97 3.938.645,47 D. Other securities 5.391,68 E. Open-end undertakings for collective investment 34.628.624,01 35.397.943,97 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -3.168,53 2.355,57 m) Financial indices Futures and forward contracts (+/-) 3.155,98 -5.597,74
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 66.117,08 65.425,58 c) Collateral 16.049,01 41.414,57 B. Payables a) Accounts payable (-) -47.906,11 -48.732,59 c) Borrowings (-) -95.087,52 -40.657,28 d) Collateral (-) -1.754.444,93 -3.395.203,27
V. Deposits and cash at bank and in hand A. Demand balances at banks 317.511,49 134.594,01
VI. Accruals and deferrals A. Expense to be carried forward 1.546,29 B. Accrued income 55.021,58 72.425,49 C. Accrued expense (-) -41.519,99 -37.283,35
TOTAL SHAREHOLDERS' EQUITY 63.172.577,39 62.389.722,80
A. Capital 32.528.213,05 36.840.862,07
B. Income equalization -18.376,09 -3.528,61
C. Profit(Loss) carried forward 25.456.929,66 43.976.262,24
D. Result for the period 5.205.810,77 -18.423.872,90
I.A.B Cash at bank and in hand/deposits 16.049,01 41.414,57
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 554.155,62 692.393,52
IX Financial instruments lent 1.624.700,97 3.938.645,47
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -51.449,30 375,20 C. Shares and similar instruments a) Shares 3.669.742,04 -6.428.849,61 D. Other securities 652,87 -1.489,87 E. Open-end undertakings for collective investment 2.504.708,25 -12.120.021,96 F. Derivative financial instruments l) Financial indices Futures and forward contracts 55.410,27 -5.597,74 G. Receivables, deposits, cash at bank and in hand
and payables -0,15 -0,82
H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -5.524,10 2.355,57 b) Other foreign exchange positions and
transactions -1.327.707,70 -75.725,55
II. Investment income and expenses A. Dividends 887.387,17 889.978,44 B. Interests a) Securities and money market instruments 127.444,43 35.183,22 b) Cash at bank and in hand and deposits 196,05 302,80 C. Interest on borrowings (-) -1.383,80 -818,49
III. Other income B. Other 4.916,22
IV. Operating expenses A. Investment transaction and delivery costs (-) -70.096,42 -80.828,80 B. Financial expenses (-) -841,51 -2.273,65 C. Custodian's fee (-) -23.079,68 -31.316,38 D. Manager's fee (-) a) Financial management -449.688,30 -481.352,54 b) Administration and accounting management -63.648,49 -70.930,07 E. Administrative expenses (-) -351,36 -282,00 F. Formation and organisation expenses (-) -5.242,85 -7.309,99 G. Remuneration, social security charges and
pension -5,17 -14,36
H. Services and sundry goods (-) -11.562,18 -14.601,27 J. Taxes -22.106,38 -24.118,61 K. Other expenses (-) -7.042,92 -11.452,64
Income and expenditure for the period Subtotal II + III + IV 359.978,59 205.081,88
V. Profit (loss) on ordinary activities before tax 5.205.810,77 -18.423.872,90
VII. Result for the period 5.205.810,77 -18.423.872,90
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 30.644.364,34 25.548.860,73 Profit (loss) brought forward from the previous
financial year 25.456.929,66 43.976.262,24
Profit for the period available for appropriation 5.205.810,77 -18.423.872,90 Income on the creation of shares (income on the
cancellation of shares) -18.376,09 -3.528,61
II. (Appropriations to) Deductions from capital -30.574.074,15
III. Profit (loss) to be carried forward 25.456.929,66
IV. (Dividends to be paid out) -70.290,19 -91.931,07
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND BRIC
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Open-end funds
UCITS registered with the FSMA
Belgium
HORIZON ACCESS FD BRAZIL KAP 15.452,00 EUR 789,120 12.193.482,24 34,12 19,39 19,30
HORIZON ACCESS FD CHINA KAP 11.800,00 USD 653,000 5.844.508,50 13,45 9,29 9,25
HORIZON ACCESS FD RUSSIA KAP 21.501,00 EUR 427,990 9.202.212,99 21,83 14,63 14,57
HORIZON ACCESS INDIA FD KAP 9.235,00 USD 1.054,780 7.388.420,28 6,34 11,75 11,70
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND BRIC (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 11.720.641,43 10.993.190,22 22.713.831,66 Sales 13.851.602,56 13.117.144,93 26.968.747,48 Total 1 25.572.243,99 24.110.335,15 49.682.579,14 Subscriptions 3.318.510,68 2.369.154,24 5.687.664,92 Redemptions 5.379.660,21 4.606.913,65 9.986.573,86 Total 2 8.698.170,89 6.976.067,89 15.674.238,78 Monthly average of total assets
66.636.419,75 62.348.837,05 64.483.347,92
Turnover rate 25,32 % 27,48 % 52,74 %
1st half of year 2nd half of year YearPurchases 11.720.641,43 10.993.190,22 22.713.831,66 Sales 13.851.602,56 13.117.144,93 26.968.747,48 Total 1 25.572.243,99 24.110.335,15 49.682.579,14 Subscriptions 3.318.510,68 2.369.154,24 5.687.664,92 Redemptions 5.379.660,21 4.606.913,65 9.986.573,86 Total 2 8.698.170,89 6.976.067,89 15.674.238,78 Monthly average of total assets
65.865.463,52 61.977.382,85 64.084.458,36
Corrected turnover rate 25,62 % 27,65 % 53,07 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
CAP BE0946137966 EUR 7.84% -0.78% -5.39% 24/05/2006 4.32%
DIV BE0946136950 EUR 7.84% -0.78% -5.39% 24/05/2006 4.32%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. the return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
where C is a factor that is determined for all N dividends between the calculation date D and the reference date. For dividend i on date Di with value Wi:
Ci = [Wi / NAV(Di)] + 1 i = 1 ... N
from which C = C0 * .... * CN. If the interval between the two dates exceeds one year, the ordinary return calculation is
converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares. Dividend on ex-dividend date 28/03/2013: 6.24 EUR net (8.32 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Distribution: 1.093% Capitalization: 1.732% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 4,056 2,419 59.64%
CSFBSAS 3,916 2,344 59.85%
MERRILL 5,964 3,644 61.09%
MORGAN STANLEY 3,302 1,748 52.93%
NOMURA 4,523 2,558 56.56%
UBSWDR 1,423 889 62.50%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.6% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.6% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The Hang Seng China Enterprises Index is a capitalization-weighted index comprised of state-owned Chinese companies (H-Shares) listed on the Stock Exchange of Hong Kong. The base value of this index is 2000 as of January 3, 2000. The Stock Exchange of Hong Kong has all proprietary rights with repect to the index. In no way the Stock Exchange of Hong Kong endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. The Stock Exchange of Hong Kong disclaims any liability for the issue and offering of the shares of this undertaking for collective investment. The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service.
Name Maximum management feeHorizon-Access Fund Brazil 1,60 Horizon-Access Fund China-Classic Shares 1,60 Horizon-Access Fund Russia 1,60 Horizon-Access India Fund-Classic Shares 1,60 KBC Equity Fund-BRIC 1,60
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 64.889,64 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ALUMINUM CORP OF CHINA LTD -H- HKD 395.999 3,550 137.570,97
BANK OF COMMUNICATIONS CO -H- HKD 303.624 5,840 173.521,50
CHINA MERCHANTS BANK CO LTD -H- HKD 180.668 17,100 302.330,32
CHINA NATL. BUILDING MATERIAL -H- HKD 135.999 11,340 150.922,20
CHINA OVERS LAND INV HKD 64.000 23,100 144.675,94
CHINA UNICOM HONG KONG LTD HKD 217.713 12,420 264.612,47
GCL POLY ENERGY HOLDINGS LTD HKD 467.999 1,560 71.445,33
GREAT WALL MOTOR CO LTD -H- HKD 3.514 24,450 8.407,85
KUNLUN ENERGY COMPANY LTD HKD 139.999 16,180 221.670,45
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FRANCE 2003 2,25% 25/07/2020 EUR 139.000 EUR 202.252,37
FRANCE 2004 1,60% 25/07/2015 EUR 580.000 EUR 745.301,16
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 428.000 EUR 471.858,02
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 299.000 EUR 335.033,39
Total 1.754.444,94 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund CSOB BRIC
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND CSOB BRIC
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 30 November 2007 Initial subscription price: 1000 CZK Currency: CZK
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED The sub-fund invests primarily, directly or indirectly, in shares of companies from different sectors in Brazil, Russia, India and China.
RISK CONCENTRATION Shares of Brazilian, Russian, Indian and Chinese companies.
INVESTMENTS IN ASSETS OTHER THAN SECURITIES OR MONEY MARKET INSTRUMENTS Under the investment policy referred to above, the sub-fund may invest primarily in permitted assets other than securities or money market instruments, including units in UCIs.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive.
A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR The KBC Equity Fund CSOB BRIC fund invests directly and indirectly in the following developing economies which make up the BRIC acronym: Brazil, Russia, India and China. The KBC Equity Fund CSOB BRIC starts the investment process in these markets by following the MSCI BRIC breakdown: Brazil 29%, Russia 14%, India 15% and China 42%, and then applying any country preferences. The fund finished the year with a positive return but underperformed its benchmark, MSCI BRIC. Over the first half of the 2012, the changing situation in Europe was the primary concern for investors who were in a risk-on, risk-off mode depending primarily on the Eurozone developments. Throughout the first quarter, the situation in Europe continued to improve and markets performed strongly. Investors accepted Greek sovereign debt swap offer and the European Central Bank provided support to troubled European banks. Economists were of opinion that China, the most important trading partner for Brazil and receiver of its commodities-based exports, will experience a slowdown in growth but short of outright recession. Global situation worsened in the second quarter of the year. In France, anti-austerity measures of a newly elected president were in opposition to the so-far dominating view advocated by German Chancellor Angela Merkel and resulted in a widening of an already existing rift in European policy. Investors were concerned that Greece, following local parliamentary elections, may leave with the Eurozone and return to its old currency, the drachma and cause an uncontrolled breakup of the European Monetary Union. Contagion fears spread to another weak link in a European chain – Spain. Its macroeconomic numbers continued to disappoint and Madrid was forced to ask for a bailout as costs of financing in capital markets were too high. Political issues were not the only force behind declines in equities. First half of the year saw a substantial deterioration in macro data globally – not only in Europe that remained in the spotlight, but also in the US and China. As a consequence, markets were very weak and in a risk-off mode, with most risk assets reversing the gains achieved in first months of the year.
At the start of the second half of the year, markets moved considerably upwards although the start of the third quarter brought even more disappointing macroeconomic news. The US growth forecast was downgraded and problems in the Eurozone continued. The equity rally gained momentum towards the end of the summer on anticipation that central banks worldwide, and an American monetary authority in particular, will start a new round of monetary easing. The expectations proved to be true when the US Fed announced QE3 in September, along with the aim of keeping interest rates low until at least the middle of 2015. In the final quarter of the year, markets gained some positive momentum in its final months on the expectation that a political resolution of ‘fiscal cliff’ issue in the United States would be found and cuts in spending and increases in taxes, which would likely prompt the US into recession, would be avoided. Other main news over the period were successful leadership transition in China and elections in Japan. On the economic front in Brazil, economic activity substantially let down in 2012. At the start of the year, market watchers were quite upbeat about prospects for Latin America’s largest economy and expected GDP growth to come in at 3.4% for the full year. However, economic data continued to come in below expectations, the awaited economic recovery failed to materialise and GDP forecasts had to be revised down accordingly. The most recent forecast for 2012 GDP growth is a lacklustre 1%. On a monetary policy front, the interest rate, the Selic, finished year at 7.25%, an all-time historic low, down from 11% at the start of the year. The slowdown in economic activity was recognised early by the Brazilian Central Bank which proved to be very proactive in their monetary response and the interest rate has been decreased by a total of 500 basis points since the summer of 2011. However, interest rate cuts and substantial pro-cyclical fiscal policy promoted by the Brazilian government failed to have a substantial and lasting impact on Brazilian economy, reinforcing the opinion that recent deterioration in economic activity is not short-term, cyclical and driven by global macroeconomic factors and but rather of more structural, domestic and long-term nature. After starting the year strongly, the Russian economic growth decelerated and external risks were rising. Despite the slowdown in economic activity in 2012, the Russian economy was fairly solid. Economic growth decelerated to 2.9 % YoY in the third quarter from 4.8 % YoY in 4Q11 but the GDP growth for the entire year should be between 3.5 % - 4 %, thus slightly lower than the year before (4.3 % in 2011). Growth was mainly driven by consumer activity, service sector expansion and some manufacturing efficiency gains rather than by extractive industries. The inflation rate reached all-time low in April when it was only 3.6 % YoY, mainly due to tariff hikes postponement. However, from July inflation was on the rise as tariffs were raised and food prices soared due to bad harvest. It should end the year around 6.5 %. The unemployment rate decreased to 5.2 % in August and reached the lowest level in modern Russian history. Surprisingly the Russian stock market did not perform as well as expected given the strong economic growth and high average oil prices. International investors were held back given a series of long term negative factors such as high corruption and poor corporate governance as well as strong national protests against Putin’s establishment.
The Indian market kicked off the year strongly outperforming the region on the back of the Central Bank signaling that it would follow a monetary easing strategy. However from end February to end May Indian equities pulled back strongly in the face of multiple headwinds including: 1) a distracted Government due to political turmoil, following a series of corruption exposes, 2) poor economic data coupled with stubbornly high inflation limiting the RBI’s ability to ease monetary policy, 3) stubbornly high global crude oil prices, putting added pressure on India’s already strained fiscal position, 4) the proposal to address tax avoidance through the introduction of General Anti Avoidance Rule (GAAR), 5) India's governing National Congress party suffering major setbacks in the five state elections 6) S&P downgrade of India's outlook to "negative” and 7) global risk aversion in the face of an uncertain global macro environment due to slowing growth and the European crisis. The second half of the year kicked off with a major cabinet reshuffle and Pranab Mukherjee was elected as the next President of India and Chidambaram Palaniappan staged a comeback as the Finance Minister. The turning point for the market came in September on the back of unexpected reform measure announced by the government, including diesel price hikes, an increased FDI limit across a number of areas and a number of important cabinet approvals passed to name a few. Rainfall also picked up over the month easing concerns surrounding the impact a deficient monsoon would have on agri-production. This together with positive developments in economic numbers combined to support investor sentiment. The rally gained further traction in the last quarter of 2012 with the government announcing the increase in FII limits for Rupee denominated government and corporate bonds and securing the vote of FDI in multi-brand retail. China went against the global trend in April, rising sharply and despite falling in May and June, the domestic market ended the first half of the year slightly ahead of international indices. While the volatility globally continued, there was also concern domestically about weakening growth in China over the first half of 2012. Growth was slower than most expected, with the official growth target being lowered to 7.5%. Most domestic activity metrics were weak – industrial production, investment and retail sales. On the positive side, inflation continued to fall, leaving room for policy makers to make changes if needed. While there was some slowdown in employment growth, there was no mass unemployment as was seen in 2008/2009. Following this slowdown, Chinese authorities began to take steps to boost growth. Initially the focus was on increasing investment, with particular focus on water and other environmental areas, utilities, railways and social housing. However at the beginning of June, the People’s Bank of China took the decision to lower lending and deposit rates by 25bps. They also took steps to liberalise the interest rate regime, seen as a significant positive. In September macroeconomic releases from China were showing a turnaround. Industrial production, retail sales and fixed investment all started to show signs of stabilization over the fourth quarter, lessening worries that the Chinese economy was experiencing a hard landing. On the political front, over the quarter, we saw the completion of a successful leadership transition in the country and while it will be 2013 before the leadership takes action on most items, the transition was completed smoothly which was a positive for the market. While the Chinese news was a significant driver of the region over the period, international factors continued to influence sentiment positively.
2.1.8 FUTURE POLICY Looking forward, we believe that 2013 will be a year of sluggish and weak growth for the overall global economy. While global growth is expected to be positive it is not anticipated that it will be much more positive when compared to 2012. Developed markets are being highlighted as the point of weakness with only modest expansion expected. The ongoing fiscal crisis in the Eurozone is expected to continue its negative influence on global growth. Despite the European Central Bank’s efforts to control and address the crisis, Europe remains in an unstable condition. Economic releases for the Eurozone countries are not supportive with overall GDP figures expected to continue their decline in 2013. A second cause of concern is the fiscal restructuring as a result of the credit crisis that remains, almost 5 years on, for both the US and Eurozone. Household incomes and corporate and financial sector rebalancing is expected to continue hindering consumption growth in these regions. The fiscal austerity that is being forced upon consumers is making stable domestic growth for many countries virtually impossible. While a political crisis has been averted in the US after a last minute agreement regarding the fiscal cliff, this may only a short term solution in advance of the debt ceiling debate to follow in February. Inflation is expected to remain contained in developed markets this year allowing monetary policy to focus on growth. In the US, growth is predicted to improve in the second half of the year along with improvement in the housing market and unemployment figures. It would appear that growth in 2013 will emanate from the same source as 2012, with almost 90% of global GDP growth expected to originate from Emerging Markets. Growth is also expected to continue in China where considerable confidence remains, however it is not expected to surpass the growth of 2012. In relation to the BRIC countries: in Brazil there are some signs that economy is turning the corner as industrial business confidence improved in a final quarter of 2012. Household spending, one of the pillars of economic growth in 2012, is expected to remain strong as consumer confidence rose to a level close to its historical peak. Labour market conditions tightened even more and continue to defy Brazil’s disappointing economic reality. The unemployment is 4.9% at the end of the year, the second lowest in the series. Together with a 9% increase to a minimum wage, it is expected to provide an additional boost to a household consumption that is already growing at a healthy rate. However, the growth in labour’s productivity remains disappointing and heated labour market conditions are likely to translate into inflationary pressures in 2013. Russia is currently in a unique position as the economy is growing relatively fast, has no debt problems and operates in an environment of positive real interest rates. The major factor for the Russian market is an oil price. We expect the price for the year 2013 to stay around current levels with upside risks given rising tensions in the Middle East. The biggest short- to mid-term risks for Russia remain to be the debt situation in Europe and economic recovery in China. We remain constructive on Indian equities in 2013. The market is well positioned gain support from further monetary easing, an improving policy environment, as evidenced in a series of announcements from the government over the last number of months, and a bottoming out of economic growth early in 2013. A substantial political calendar however implies potential equity market volatility. With a backdrop of weak global growth domestic demand led economies such as India stand out. In addition, lower global growth tends to translate into lower commodity prices which not only helps lower inflation but anchor inflation expectations. Growth in China has slowed down in recent years and that the outlook now is for a lower level of growth than was achieved before. However we expect that policy makers will avoid a hard landing and will provide support to the market. The new leadership will announce their policy changes during the course of 2013 and this has the potential to drive the market further. We believe that the impact of loosening announced in 2012 as well as additional investment in infrastructure will support growth looking into 2013.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 435.601.850,28 381.855.317,11
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 13.254.920,88 10.500.197,48 C. Shares and similar instruments a) Shares 194.738.349,64 163.889.432,17 Of which securities lent 12.265.806,25 11.075.107,22 D. Other securities 27.500,81 E. Open-end undertakings for collective investment 238.086.500,59 215.639.285,05
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 813.125,61 1.006.919,98 B. Payables a) Accounts payable (-) -52.052,02 -313.641,37 c) Borrowings (-) -539.529,48 -139.107,13 d) Collateral (-) -13.254.920,88 -10.500.197,48
V. Deposits and cash at bank and in hand A. Demand balances at banks 2.347.392,77 1.665.198,50
VI. Accruals and deferrals A. Expense to be carried forward 6.487,68 B. Accrued income 365.362,41 213.993,22 C. Accrued expense (-) -157.299,24 -140.751,80
TOTAL SHAREHOLDERS' EQUITY 435.601.850,28 381.855.317,11
A. Capital 356.443.236,78 331.357.956,75
B. Income equalization 48.592,46 -35.389,69
C. Profit(Loss) carried forward 50.497.360,36 145.044.185,14
D. Result for the period 28.612.660,68 -94.511.435,09
IX Financial instruments lent 12.265.806,25 11.075.107,22
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 25.232.789,43 -47.702.708,80 D. Other securities 3.326,16 -3.224,74 E. Open-end undertakings for collective investment 15.939.593,99 -66.442.749,28 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -15.103.798,90 19.090.662,84
II. Investment income and expenses A. Dividends 5.999.137,09 4.624.641,57 B. Interests a) Securities and money market instruments 910.607,50 96.553,07 b) Cash at bank and in hand and deposits 1.725,73 2.467,94 C. Interest on borrowings (-) -4.062,76 -3.401,76
III. Other income B. Other 13.449,80
IV. Operating expenses A. Investment transaction and delivery costs (-) -712.883,58 -713.605,59 B. Financial expenses (-) -5.715,28 -31.244,39 C. Custodian's fee (-) -139.558,05 -136.309,19 D. Manager's fee (-) a) Financial management -2.902.049,36 -2.683.382,59 b) Administration and accounting management -410.670,56 -397.647,61 F. Formation and organisation expenses (-) -31.444,31 -37.733,74 G. Remuneration, social security charges and
pension -77,33
H. Services and sundry goods (-) -90.395,74 -77.946,98 J. Taxes -10.817,47 -25.761,72 K. Other expenses (-) -63.123,21 -83.416,59
Income and expenditure for the period Subtotal II + III + IV 2.540.750,00 546.584,89
V. Profit (loss) on ordinary activities before tax 28.612.660,68 -94.511.435,09
VII. Result for the period 28.612.660,68 -94.511.435,09
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 79.158.613,50 50.497.360,36 Profit (loss) brought forward from the previous
financial year 50.497.360,36 145.044.185,14
Profit for the period available for appropriation 28.612.660,68 -94.511.435,09 Income on the creation of shares (income on the
cancellation of shares) 48.592,46 -35.389,69
II. (Appropriations to) Deductions from capital -79.158.613,50
III. Profit (loss) to be carried forward 50.497.360,36
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND CSOB BRIC
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Open-end funds
UCITS registered with the FSMA
Belgium
HORIZON ACCESS FD BRAZIL KAP 4.257,00 EUR 789,120 84.304.588,45 9,40 19,48 19,36
HORIZON ACCESS FD CHINA KAP 3.266,00 USD 653,000 40.596.320,86 3,72 9,38 9,32
HORIZON ACCESS FD RUSSIA KAP 5.816,00 EUR 427,990 62.468.709,11 5,91 14,43 14,34
HORIZON ACCESS INDIA FD KAP 2.526,00 USD 1.054,780 50.716.882,17 1,73 11,72 11,64
Total investment funds 238.086.500,59 55,01 54,66
Shares
Exchange-listed shares
Bermuda
CNPC HONG KONG LTD - 36.000,00 HKD 16,180 1.430.506,63 0,33 0,33
Brazil
AMBEV-CIA DE BEBIDAS DAS AMERICAS PREF 4.005,00 BRL 85,580 3.186.368,35 0,74 0,73
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND CSOB BRIC (IN
THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 101.161.545,16 87.912.422,43 189.073.967,59 Sales 81.261.315,77 81.063.009,24 162.324.325,01 Total 1 182.422.860,93 168.975.431,67 351.398.292,60 Subscriptions 47.466.333,09 35.877.872,98 83.344.206,07 Redemptions 27.544.262,46 30.815.091,06 58.359.353,52 Total 2 75.010.595,55 66.692.964,04 141.703.559,59 Monthly average of total assets
416.346.518,46 420.714.197,07 418.539.811,61
Turnover rate 25,80 % 24,31 % 50,10 %
1st half of year 2nd half of year YearPurchases 101.161.545,16 87.912.422,43 189.073.967,59 Sales 81.261.315,77 81.063.009,24 162.324.325,01 Total 1 182.422.860,93 168.975.431,67 351.398.292,60 Subscriptions 47.466.333,09 35.877.872,98 83.344.206,07 Redemptions 27.544.262,46 30.815.091,06 58.359.353,52 Total 2 75.010.595,55 66.692.964,04 141.703.559,59 Monthly average of total assets
408.380.599,89 416.323.948,33 414.105.480,09
Corrected turnover rate 26,30 % 24,57 % 50,64 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 528.168,66 13.254.920,88 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2010 - 12 140.703.940,94 0,00 77.437.384,54 0,00
2011 - 12 142.997.698,78 0,00 72.540.018,50 0,00
2012 - 12 83.641.183,89 0,00 58.507.311,40 0,00
Period Net asset value
End of period (in the currency of the sub-fund)
Year Of the sub-fund Of one share
Capitalization Distribution
2010 - 12 405.909.071,92 860,78 N/A
2011 - 12 381.855.317,11 681,75 N/A
2012 - 12 435.601.850,28 732,51 N/A
2.4.5 PERFORMANCE FIGURES
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0947600079 EUR 7.65% -1.12% -5.39% 30/11/2007 -5.13%
CAP BE0947600079 CZK 5.93% -2.78% -6.48% 30/11/2007 -6.01%
DIV BE0947599065 EUR 30/11/2007
DIV BE0947599065 CZK 30/11/2007
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in CZK and in EUR. the return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
where C is a factor that is determined for all N dividends between the calculation date D and the reference date. For dividend i on date Di with value Wi:
Ci = [Wi / NAV(Di)] + 1 i = 1 ... N
from which C = C0 * .... * CN. If the interval between the two dates exceeds one year, the ordinary return calculation is
converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
2.4.6 COSTS Total expense ratio (TER): * Distribution: Not applicable Capitalization: 1.843% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 1,828 1,085 59.35%
CSFBSAS 795 423 53.22%
MERRILL 927 571 61.55%
MORGAN STANLEY 1,463 825 56.37%
NOMURA 1,362 735 53.97%
UBSWDR 301 188 62.50%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek.
Name Maximum management feeHorizon-Access Fund Brazil 1,60 Horizon-Access Fund China-Classic Shares 1,60 Horizon-Access Fund Russia 1,60 Horizon-Access India Fund-Classic Shares 1,60 KBC Equity Fund-CSOB BRIC 1,50
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 872.994,27 CZK. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ALUMINUM CORP OF CHINA LTD -H- HKD 123.999 3,550 1.081.073,94
BANK OF COMMUNICATIONS CO -H- HKD 69.894 5,840 1.002.447,42
CHINA MERCHANTS BANK CO LTD -H- HKD 51.210 17,100 2.150.600,47
CHINA UNICOM HONG KONG LTD HKD 59.373 12,420 1.811.004,15
COSCO PACIFIC HKD 35.999 11,040 976.041,66
GCL POLY ENERGY HOLDINGS LTD HKD 126.999 1,560 486.556,98
GREAT WALL MOTOR CO LTD -H- HKD 13.399 24,450 804.563,20
KUNLUN ENERGY COMPANY LTD HKD 35.999 16,180 1.430.466,98
SINO-OCEAN LAND HOLDINGS LTD HKD 55.999 5,790 796.283,53
ZIJIN MINING GROUP CO -H- HKD 115.491 3,050 865.081,20
Total 12.265.806,25
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 2.000 CZK 61.324,79
FRANCE 2003 2,25% 25/07/2020 EUR 51.000 CZK 1.862.316,51
FRANCE 2004 1,60% 25/07/2015 EUR 107.000 CZK 3.450.579,89
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 233.000 CZK 6.446.559,49
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 51.000 CZK 1.434.140,11
Total 13.254.920,79 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund CSOB Akciovy Fond Dividendovych Firem
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND CSOB AKCIOVY FOND DIVIDENDOVYCH FIREM
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 28 September 2012 Initial subscription price: 1000 CZK Currency: CZK
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED KBC Equity Fund CSOB Akciovy Fond Dividendovych Firem aims to generate a return by investing at least 75% of its assets in shares with a high dividend yield. All regions, sectors and themes may be taken into consideration. The rest of the assets will be invested in bonds, debt instruments, money market instruments and deposits.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive.
A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR KBC Equity Fund CSOB Akciovy Fond Dividendovych Firem launched on 02nd October 2012. The NAV of KBC Equity Fund New Share rising from CZK 988.70 on 02nd October 2012 to CZK 1000.78 on 28th December 2012. The fourth quarter was an eventful one, with the US taking the spotlight from the Eurozone. A hard-fought presidential election saw President Obama retain the presidency, and markets focused very much on efforts to avert the “fiscal cliff” – a series of sharp tax increases and spending cuts which were due to come into effect on January 1st if no agreement could be reached on how to defer them. In Europe, it was a period of (relative) calm, with the main events being a new rescue package being agreed for Greece, and a slightly earlier than expected end to the cross-party government in Italy. In China, a new leadership team was announced, and growth seemed to rebound somewhat. Indeed, with the exception of the Eurozone where a recession continued, growth around the world held up quite well during the quarter. The fund outperformed global equities over the final quarter of 2012. This was a positive outcome because from a style point of view, high dividends were mostly out of favour during the final quarter with poor relative performance in all regions for high yielding stocks in general. Avoiding traditional yield traps through our all industry, all region approach to investing in high dividends enhanced the Fund’s return over the quarter. Our focus on buying stocks with strong balance sheets and an ability to sustain and potentially grow that dividend were the main drivers of the Fund’s outperformance during the period under review.
2.1.8 FUTURE POLICY Our expectation for 2013 is that we will see another positive year for market returns, although we don’t expect that returns will hit double digits for the second consecutive year. The global macro background remains fragile and volatile, contrasting with the corporate sector which remains robust as companies deliver solid and consistent earnings and dividend growth. In light of the challenging macro conditions the global economy still requires a highly supportive policy-making framework with central banks and politicians ensuring measures are in place to underpin the weak macro environment. These policy measures will remain the key support mechanism until we have a less fragile and more positive and sustained global growth environment. For the first half of the year, at least, we expect that the pivotal support role played by global authorities will remain necessary. But this should fade into the background in the later part of the year as global growth becomes more robust and sustainable. As political and economic uncertainty diminishes through the year, it is reasonable to expect a more material pickup in growth and indeed there is a scenario whereby growth in the US economy in particular could surprise to the upside. Stock picking will be increasingly important as those companies that continue to deliver solid earnings above the more anaemic economic growth levels will continue to be rewarded. The search for yield and income will remain a prevalent theme so a key focus for stock picking should be on companies that are delivering high, growing, and sustainable dividends.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
TOTAL NET ASSETS 176.560.730,96
II. Securities, money market instruments, UCIs and derivatives
C. Shares and similar instruments a) Shares 171.792.621,47 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) 68.123,14
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 189.137.224,80 b) Tax assets 12.852,16 B. Payables a) Accounts payable (-) -187.616.899,11 c) Borrowings (-) -18.877.816,03
V. Deposits and cash at bank and in hand A. Demand balances at banks 21.972.394,44
VI. Accruals and deferrals B. Accrued income 232.396,86 C. Accrued expense (-) -160.166,77
TOTAL SHAREHOLDERS' EQUITY 176.560.730,96
A. Capital 174.382.096,70
B. Income equalization -17.472,96
D. Result for the period 2.196.107,22
Off-balance-sheet headings
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 104.407.505,70
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 4.783.759,14 H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts 68.123,14 b) Other foreign exchange positions and
transactions -2.772.648,22
II. Investment income and expenses A. Dividends 1.135.020,31 B. Interests b) Cash at bank and in hand and deposits 2.112,28 C. Interest on borrowings (-) -7.919,06
IV. Operating expenses A. Investment transaction and delivery costs (-) -296.410,84 B. Financial expenses (-) -2.479,81 D. Manager's fee (-) a) Financial management -586.516,58 b) Administration and accounting management -40.128,81 F. Formation and organisation expenses (-) -728,62 H. Services and sundry goods (-) -1.155,08 J. Taxes -1.824,84 K. Other expenses (-) -83.095,79
Income and expenditure for the period Subtotal II + III + IV 116.873,16
V. Profit (loss) on ordinary activities before tax 2.196.107,22
VII. Result for the period 2.196.107,22
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
I. Profit to be appropriated 2.178.634,26 Profit for the period available for appropriation 2.196.107,22 Income on the creation of shares (income on the
cancellation of shares) -17.472,96
II. (Appropriations to) Deductions from capital -2.178.634,26
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND CSOB AKCIOVY FOND
DIVIDENDOVYCH FIREM
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Australia
AGL ENERGY LIMITED - 3.050,00 AUD 15,380 927.024,39 0,54 0,53
ANZ BANKING GROUP - 2.988,00 AUD 25,050 1.479.187,78 0,86 0,84
COMMONWEALTH BK OF AUSTRALIA - 1.278,00 AUD 62,180 1.570.422,68 0,91 0,89
MIRVAC GROUP - 37.968,00 AUD 1,485 1.114.241,07 0,65 0,63
NATIONAL AUSTRALIA BANK - 3.068,00 AUD 25,000 1.515.759,68 0,88 0,86
RIO TINTO LTD - 911,00 AUD 66,010 1.188.401,24 0,69 0,67
SAFEWAY INC. - 12.228,00 USD 18,090 4.210.671,02 2,45 2,39
SPECTRA ENERGY CORP - 3.091,00 USD 27,380 1.610.978,57 0,94 0,91
TIME WARNER INC - 910,00 USD 47,830 828.512,54 0,48 0,47
TOTAL SYSTEMS SERVICES - 1.930,00 USD 21,420 786.926,35 0,46 0,45
WEST UNION COMPANY - 3.800,00 USD 13,610 984.462,18 0,57 0,56
Total shares 171.792.621,47 99,96 97,30
Forward contracts CZK 68.123,14 0,04
TOTAL SECURITIES PORTFOLIO 171.860.744,61 100,00 97,34
CASH AT BANK AND IN HAND
Demand accounts
Belgium
KBC GROUP AUD 8.829,15 AUD 1,000 174.483,31 0,10
KBC GROUP CAD 9.938,20 CAD 1,000 189.997,01 0,11
KBC GROUP CHF 5.968,67 CHF 1,000 124.121,43 0,07
KBC GROUP CZK 20.343.513,12 CZK 1,000 20.343.513,12 11,52
KBC GROUP EURO -752.224,09 EUR 1,000 -18.877.816,03 -10,69
KBC GROUP GBP 3.926,77 GBP 1,000 121.497,01 0,07
KBC GROUP HKD 57.891,17 HKD 1,000 142.174,33 0,08
KBC GROUP JPY 525.693,00 JPY 1,000 115.726,24 0,07
KBC GROUP NOK 33.776,76 NOK 1,000 115.529,30 0,07
KBC GROUP NZD 2.825,60 NZD 1,000 44.372,23 0,03
KBC GROUP SEK 85.968,36 SEK 1,000 251.546,26 0,14
KBC GROUP USD 18.357,27 USD 1,000 349.434,20 0,20
Total demand accounts 3.094.578,41 1,75
TOTAL CASH AT BANK AND IN HAND 3.094.578,41 1,75
OTHER RECEIVABLES AND PAYABLES
Receivables
Belgium
KBC GROUP CZK RECEIVABLE 85.760.799,97 CZK 1,000 85.760.799,97 48,57
KBC GROUP EUR RECEIVABLE 772.000,00 EUR 1,000 19.374.112,28 10,97
KBC GROUP USD RECEIVABLE 4.413.000,00 USD 1,000 84.002.312,55 47,58
KBC GROUP WHT TO BE RECOVERED EUR 512,12 EUR 1,000 12.852,16 0,01
Total receivables 189.150.076,96 107,13
Payables
Belgium
KBC GROUP CAD PAYABLE -7.831,47 CAD 1,000 -149.720,86 -0,09
KBC GROUP CZK PAYABLE -103.464.865,70 CZK 1,000 -103.464.865,70 -58,60
KBC GROUP USD PAYABLE -4.413.000,00 USD 1,000 -84.002.312,55 -47,58
Payables -187.616.899,11 -106,26
TOTAL RECEIVABLES AND PAYABLES 1.533.177,85 0,87
OTHER
Interest receivable CZK 232.396,86 0,13
Expenses payable CZK -160.166,77 -0,09
TOTAL OTHER 72.230,09 0,04
TOTAL NET ASSETS 176.560.730,96 100,00
Geographic breakdown (as a % of securities portfolio)
31/12/2012Australia 4,54 Belgium 0,84 Canada 8,98 Switzerland 1,89 Germany 2,18 Spain 0,53 Finland 1,23 France 3,74 U.K. 9,19 Hong Kong 0,58 Italy 1,94 Japan 8,09 Netherlands 1,86 Norway 2,67 New Zealand 0,61 Sweden 1,83 U.S.A. 49,30 Total 100,00
Sector breakdown (as a % of securities portfolio)
31/12/2012Cyclicals 24,39 Consum(cycl) 12,31 Cons.goods 12,06 Pharma 10,40 Financials 19,59 Technology 10,92 Telecomm. 5,11 Utilities 3,20 Real est. 2,02 Total 100,00
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND CSOB AKCIOVY
FOND DIVIDENDOVYCH FIREM (IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 0,00 181.633.441,09 181.633.441,09 Sales 0,00 12.156.595,51 12.156.595,51 Total 1 0,00 193.790.036,60 193.790.036,60 Subscriptions 0,00 174.424.859,89 174.424.859,89 Redemptions 0,00 42.763,19 42.763,19 Total 2 0,00 174.467.623,08 174.467.623,08 Monthly average of total assets
0,00 157.936.483,43 157.936.483,43
Turnover rate 0,00 % 12,23 % 12,23 %
1st half of year 2nd half of year YearPurchases 0,00 181.633.441,09 181.633.441,09 Sales 0,00 12.156.595,51 12.156.595,51 Total 1 0,00 193.790.036,60 193.790.036,60 Subscriptions 0,00 174.424.859,89 174.424.859,89 Redemptions 0,00 42.763,19 42.763,19 Total 2 0,00 174.467.623,08 174.467.623,08 Monthly average of total assets
0,00 123.949.025,08 123.949.025,08
Corrected turnover rate 0,00 % 15,59 % 15,59 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC AK-VK CZK-EUR 130204-130103 25.0989
CZK 21.108.174,90 21.108.174,90 N/A 31.12.2012
KBC AK-VK CZK-USD 130204-130103 19.0442
CZK 83.299.330,80 83.299.330,80 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2012 - 12 174.407.453,74 0,00 42.830,00 0,00
Period Net asset value
End of period (in the currency of the sub-fund)
Year Of the sub-fund Of one share
Capitalization Distribution
2012 - 12 176.560.730,96 1.010,12 N/A
2.4.5 PERFORMANCE FIGURES The cumulative returns are shown where they relate to a period of at least one year.
2.4.6 COSTS Total expense ratio (TER): Not applicable
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Belgium
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND BELGIUM
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 1 October 1991 Initial subscription price: 5000 BEF Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of Belgian companies.
RISK CONCENTRATION Belgian shares.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive.
A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Real GDP in the EMU contracted by an annualised 0.3%. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany played its traditional role as European economic engine to a lesser extent than in the recent past. Greater divergence within Europe resulted primarily in a further decline in unemployment in Germany and an alarmingly rapid rise in joblessness in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery. The European debt crisis continued to hang over the economy of the EMU in 2012 like the sword of Damocles. Following the ECB's long-term refinancing operations (LTROs) of December 2011 and February 2012, it appeared for a short while as though the central bank had pumped enough cash into the financial markets to take away the uncertainty for a time, but the numbing effect of these LTROs proved to be short lived. The flaring up of problems with the banks in Spain and speculation about Greece exiting the euro area caused the crisis to explode again in the second quarter of 2012. During the summer months the Belgian shares responded positively to the statement by Mario Draghi, the President of the European Central Bank, that the euro would be defended at any cost. In September the ECB launched its Outright Monetary Transactions (OMT) programme, under which unlimited purchases will be made of short-dated (up to three years) government bonds issued by struggling countries, provided certain conditions are met. Following a consolidation the Bel20 continued its rally in the second half of the fourth quarter. KBC Equity Fund Belgium shareholders obtained a positive return (in euros) of more than 25% in 2012. The fund performed better than the Bel20 index thanks to the relatively good performance of, among others, Thrombogenics, Econocom and Jensen. The underweight positions in AB InBev and Solvay and the overweight position in D’Ieteren adversely affected the relative performance of the fund. Within the Bel20 KBC and Ageas recorded the strongest performance. Solvay and AB InBev, which acquired the Mexican market leader Modelo, were once again star performers. D’Ieteren, Mobistar and especially Delhaize, which is grappling with structural problems in its two main markets, were the main disappointments during the period under review.
2.1.8 FUTURE POLICY Europe remains in a low-growth environment, with no underlying inflationary pressure, low interest rates and runaway public finances. The need to strengthen its internal mechanisms is becoming a matter of urgency for the euro area. This involves measures such as supranational supervision of banks, strict monitoring and sanctioning of budgetary policy, monitoring of pay policy and harmonising European taxation. There is no urgent macroeconomic reason to increase the exceptionally low money market rates so long as the economic situation in the West remains weak and there is no sign of any real inflationary pressures. Against this background KBC Equity Fund Belgium is overweighting a number of attractively valued companies in various sectors, such as Tessenderlo Chemie, CFE, EVS, Melexis and Kinepolis. Food distributors and the telecom sector are underweighted. The evolution of the European debt crisis and the associated credibility of the euro remain crucial to share price trends in the European and Belgian banking sectors. This problem remains as serious as ever due to the approach adopted by European leaders. We will be monitoring this closely.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 36.137.904,49 38.981.381,69
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 167.700,80 198.526,50 a} Collateral received in the form of bonds 92.687,90 89.535,86 C. Shares and similar instruments a) Shares 35.110.087,58 38.019.368,86 Of which securities lent 85.750,00 97.157,20 b) Closed-end undertakings for collective
investment 108.351,30 85.329,00
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 26.997,01 2.229,86 b) Tax assets 684.264,92 664.386,55 B. Payables a) Accounts payable (-) -19.924,90 -0,20 d) Collateral (-) -92.687,90 -89.535,86
V. Deposits and cash at bank and in hand A. Demand balances at banks 102.023,21 39.859,24
VI. Accruals and deferrals A. Expense to be carried forward 1.859,92 B. Accrued income 2.324,93 8.467,58 C. Accrued expense (-) -43.920,36 -38.645,62
TOTAL SHAREHOLDERS' EQUITY 36.137.904,49 38.981.381,69
A. Capital 15.729.941,93 26.906.403,09
B. Income equalization -264.347,43 -54.938,90
C. Profit(Loss) carried forward 11.972.356,82 21.352.350,65
D. Result for the period 8.699.953,17 -9.222.433,15
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -30.825,70 224,80 C. Shares and similar instruments a) Shares 7.802.024,29 -10.101.192,84 b) Closed-end undertakings for collective
investment 17.767,41 -8.751,99
D. Other securities -0,67 -6,43 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -0,42 -0,51
II. Investment income and expenses A. Dividends 1.547.142,22 1.663.238,23 B. Interests a) Securities and money market instruments 52.612,70 39.752,59 b) Cash at bank and in hand and deposits 1.495,33 675,70 C. Interest on borrowings (-) -1.101,70 -5.836,85
III. Other income B. Other 2.468,88
IV. Operating expenses A. Investment transaction and delivery costs (-) -67.103,34 -67.183,48 B. Financial expenses (-) -517,23 -3.480,59 C. Custodian's fee (-) -32.502,48 -40.404,24 D. Manager's fee (-) a) Financial management -515.724,88 -597.162,27 b) Administration and accounting management -38.938,32 -46.367,40 E. Administrative expenses (-) -437,98 -215,29 F. Formation and organisation expenses (-) -3.360,93 -5.039,79 G. Remuneration, social security charges and
pension -3,28 -10,32
H. Services and sundry goods (-) -7.572,62 -9.822,42 J. Taxes -16.712,55 -34.032,14 K. Other expenses (-) -6.286,68 -9.286,79
Income and expenditure for the period Subtotal II + III + IV 910.988,26 887.293,82
V. Profit (loss) on ordinary activities before tax 8.699.953,17 -9.222.433,15
VII. Result for the period 8.699.953,17 -9.222.433,15
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 20.407.962,56 12.074.978,60 Profit (loss) brought forward from the previous
financial year 11.972.356,82 21.352.350,65
Profit for the period available for appropriation 8.699.953,17 -9.222.433,15 Income on the creation of shares (income on the
cancellation of shares) -264.347,43 -54.938,90
II. (Appropriations to) Deductions from capital -20.295.332,28
III. Profit (loss) to be carried forward 11.972.356,82
IV. (Dividends to be paid out) -112.630,28 -102.621,78
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND BELGIUM
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Closed-end funds
Listed closed-end investment funds
Belgium
QUEST FOR GROWTH - 19.009,00 EUR 5,700 108.351,30 0,31 0,30
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND BELGIUM (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 20.292.572,26 10.985.991,42 31.278.563,68 Sales 20.892.756,49 21.091.858,76 41.984.615,25 Total 1 41.185.328,74 32.077.850,19 73.263.178,93 Subscriptions 4.786.152,31 4.077.498,21 8.863.650,52 Redemptions 5.900.585,33 14.088.014,52 19.988.599,85 Total 2 10.686.737,64 18.165.512,73 28.852.250,37 Monthly average of total assets
41.836.481,56 37.880.185,25 39.842.508,22
Turnover rate 72,90 % 36,73 % 111,47 %
1st half of year 2nd half of year YearPurchases 20.292.572,26 10.985.991,42 31.278.563,68 Sales 20.892.756,49 21.091.858,76 41.984.615,25 Total 1 41.185.328,74 32.077.850,19 73.263.178,93 Subscriptions 4.786.152,31 4.077.498,21 8.863.650,52 Redemptions 5.900.585,33 14.088.014,52 19.988.599,85 Total 2 10.686.737,64 18.165.512,73 28.852.250,37 Monthly average of total assets
40.575.521,99 36.117.179,27 38.497.684,26
Corrected turnover rate 75,17 % 38,52 % 115,36 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 92.687,90 92.687,90 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
CAP BE0129009966 EUR 25.02% 1.84% -9.82% 4.20% 31/05/1999 -0.61%
DIV BE0129141348 EUR 24.98% 1.81% -9.84% 4.18% 31/05/1999 -0.63%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). the return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
where C is a factor that is determined for all N dividends between the calculation date D and the reference date. For dividend i on date Di with value Wi:
Ci = [Wi / NAV(Di)] + 1 i = 1 ... N
from which C = C0 * .... * CN. If the interval between the two dates exceeds one year, the ordinary return calculation is
converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares. Dividend on ex-dividend date 28/03/2013: 3.33 EUR net (4.43 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Distribution: 1.612% Capitalization: 1.578% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 2,683 1,359 50.66%
CSFBSAS 1,088 525 48.23%
DEUTSCHE 6,396 3,161 49.42%
HSBC 177 89 50.00%
NOMURA 411 197 47.90%
SOCGEN 772 376 48.64%
UBSWDR 1,146 565 49.31%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek.
Name Maximum management feeKBC Equity Fund-Belgium 1,50
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 13.697,21 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
BEKAERT EUR 3.920 21,875 85.750,00
Total 85.750,00
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4% 25/04/14 EUR 12.000 EUR 12.956,56
FRANCE 2004 1,60% 25/07/2015 EUR 2.000 EUR 2.570,00
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 53.000 EUR 58.431,02
Total 92.687,91 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund World
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND WORLD
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 5 April 1991 Initial subscription price: 11741 BEF Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in an international basket of shares.
INVESTMENTS PRIMARILY IN ASSETS OTHER THAN SECURITIES OR MONEY MARKET INSTRUMENTS The sub-fund will invest primarily in permitted assets other than securities or money market instruments, including units in other UCIs.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive.
A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. The debt crisis in Europe continued to rage unabated. Five euro countries have already needed a bailout from the European emergency fund. Greece twice reached an agreement during the year with its private sector creditors on restructuring the bond debt it owes them. Spain found itself in the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. Consolidation of the stock-market rally The initial phase of the economic recovery went hand in hand with a fine stock-market rally, resulting in the S&P 500 being 75% higher at the end of April 2010 than its low point on 9 March 2009. Since then, the equity markets have struggled to find fresh impetus. The euro crisis and fear that the European banking sector would collapse naturally continued to cast a dark cloud over the market. On top of this, the stock markets were affected by vacillating sentiment about the economic situation, and the same is true of 2012. In the first three months the markets were buoyed up by relative economic optimism. After the gains slackened in April and May, a fine rally occurred from early June onwards, thereby negating the gloomier economic signals. The MSCI All Countries (the broadest global index) was up 14.5% in euros on December compared to year-end 2011. Regional performance Of the traditional markets, Western Europe (MSCI Europe return index up +18.4% over this period) managed to claw back some of the underperformance that has built up since the start of the euro crisis in autumn 2009. Nevertheless the problems continued to mount in the EMU: they include the Greek debt restructuring, the threat of an extremist separatist party winning the Greek elections, the undercapitalisation of Spanish banks, the referendum in Ireland, and the financial collapse in Cyprus. Evidently the underperformance of European shares over many years has increased the valuation gap with US shares to such an extent that fresh events in the euro crisis have less impact on the stock markets. Wall Street closed the year substantially higher on balance (S&P500: +13.4%, Dow Jones: +7.3%), while European investors also benefited from a small increase in the value of the dollar (return MSCI USA in euros: +13,9%).
The return on the Japanese stock exchange (+6.1%) was positive but hardly convincing from a global perspective. Over the past years (and indeed decades) the Japanese market has lost much of its attraction. Domestic investors are sceptical about the country’s economic and political stability. Foreign investors, who previously capitalised on growth in Asia via the Tokyo stock exchange, now have better (direct) alternatives. The Asian emerging markets (+20.4%) lagged behind well into 2011, but were able to regain ground as from early 2012. Investors were worried about rising inflation and the tightening of monetary policy. Developments in recent months have proved that to be unjustified. Stock-market valuations remain favourable, especially given the high growth forecasts, sound macroeconomic balance and a banking sector that was barely – if at all – affected by the credit crisis. The Latin American markets (+6.8%) were also hit by the fears of overheating. The link to the commodity markets is always at the fore. Eastern Europe (+16.1%) was a divided region. The Russian stock market excelled until mid-2011, owing to the increase in oil prices. This later changed when oil prices slipped, which had an immediate effect on the valuation of oil companies and an indirect effect by way of a higher premium for the 'Russia' risk because of the resultant fall in government revenue. Sectoral performance There were major differences in the returns for the various sectors. The best performing sectors included Financials, Pharmaceuticals and Consumer Discretionary. The worst performers included Energy, Utilities and Telecommunication Services. The outperformance of the Banks is no doubt associated with the quantitative easing programmes undertaken by the central banks. That entails the Fed’s QE3 and, more especially, the announcement of OMT by the ECB, which eased the pressure of the euro crisis. Pharmaceuticals had been shunned for a long time due to a lack of product innovation, patent expiry and the reforms to healthcare insurance in the US. In recent months investors began to focus on the sector’s response to these challenges: restructuring operations and the sell-off of non-strategic divisions. Media put in a very strong performance. The advertising markets emerged from a deep trough thanks to the Olympic Games and the presidential elections in the US. Other significant trends are the increasing popularity of e-books and the ongoing breakthrough of digital television. The oil companies suffered from the vagaries of the oil market, the political instability in the Middle East and frequent accidents. The consequences of the Fukushima nuclear disaster continued to cast a shadow throughout the world over the future of nuclear power plants. The forecast growth will also necessitate further investments in network capacity and it is not clear whether the budgets allocated by the telecom operators will be sufficient.
2.1.8 FUTURE POLICY The US and European barometers measuring confidence among business leaders peaked in spring 2011 at record levels, but have slipped over the past 18 months. In the US they have ended up in the twilight zone between recession and expansion. In Europe they are below freezing point. We are expecting US growth to remain positive but modest (around 1.5-2% y-o-y in the coming quarters) as jobs growth remains moderate, pay increases are barely keeping pace with inflation and budgetary policy has now finally (and probably for many years) struck down the path of austerity. The fragile recovery of the housing market and of corporate investment could be sustained. In Europe the budgetary plans, the banks' tighter lending policy and the high level of uncertainty among consumers and producers will continue to weigh on growth. In first half of the year could therefore see a contraction of European GDP. No recovery is therefore anticipated until the second half.
Today’s world is one of two-speed economies. The mature industrialised economies (US, Europe, Japan) still find themselves in a low-growth environment, with no underlying inflationary pressure, persistently low interest rates and runaway public finances. The picture in the 'new world' is altogether different. The strong economic growth has sometimes already created inflationary pressure in Asia. As a result, monetary policy in the region will need to be more cautious, or even restrictive (as in 2011) rather than accommodating (as at present). Monetary policy in China and elsewhere in Asia is therefore primed for adjustment and geared to preventing asset-price inflation. This implies not only adjusting interest rates but also active intervention on the credit and foreign exchange markets. This cautious policy is beginning to bear fruit. In China, the rate of increase in the money supply has already slowed considerably, to match the rate of nominal GDP growth. Inflation fell from 6.5% in September 2011 to 2.1% in November 2012. The risk of overheating therefore appears under control. During a period in which a new leadership of the Chinese Communist Party will be installed, little will be left to chance and economic growth will be barely lower than in previous years. One of the major challenges for this decade will be the further development of consumption in China and the rest of Asia. That could help bring about a more balanced economic world order: it will not only reduce the region’s dependence on exports but, at least as importantly, will have an effect on international capital flows. More consumption in China means lower savings and more imports, which will help the West to ‘grow out’ of its debt problems. Thanks to the continued strong growth in the emerging markets, the global economy could post growth of 2–2.5% in 2012 and 2.5–3% in 2013. This is one of the reasons why corporate earnings could continue to grow in the coming quarters at a rate of 5–10%. It seems paradoxical that companies have emerged as the winners from the 2008/09 crisis. They are now reaping the benefits of the considerable restructuring measures pushed through during the recession. Cost controls go beyond (one-off and in some cases spectacular) restructuring measures and have now become an integral part of business culture. The recession of 2008/09 caused companies to be even more aware of risks (i.e. money, and hence costs). Investment projects are subject to a more thorough profitability study. A combination of debt reduction and low interest rates has resulted in a steep drop in financial charges. Globalisation (pressure of relocation) and ongoing high unemployment have made employees powerless to demand high pay increases. Maintaining purchasing power is now about all that is on offer. There is no question of real wage rises. In brief, every cent increase in revenue goes (almost) entirely to the capital factor.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 83.354.531,98 87.989.070,17
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 989.390,80 2.177.108,00 C. Shares and similar instruments a) Shares 1.039.147,10 1.207.704,01 b) Closed-end undertakings for collective
investment 105.218,40
E. Open-end undertakings for collective investment 81.037.838,80 83.757.654,41 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -13.142,32 m) Financial indices Futures and forward contracts (+/-) 5.125,60 26.716,16
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 9.528,79 4.083,70 b) Tax assets 5.514,87 c) Collateral 100.643,00 148.565,37 B. Payables a) Accounts payable (-) -96.972,70 -159.261,36
V. Deposits and cash at bank and in hand A. Demand balances at banks 349.216,49 782.078,84
VI. Accruals and deferrals A. Expense to be carried forward 1.625,41 B. Accrued income 5.097,95 3.580,20 C. Accrued expense (-) -71.341,53 -71.517,84
TOTAL SHAREHOLDERS' EQUITY 83.354.531,98 87.989.070,17
A. Capital 63.334.176,64 79.522.014,55
B. Income equalization -15.277,40 40.038,96
C. Profit(Loss) carried forward 8.442.358,17 10.805.986,55
D. Result for the period 11.593.274,57 -2.378.969,89
Off-balance-sheet headings
I Collateral (+/-)
I.A Collateral (+/-)
I.A.B Cash at bank and in hand/deposits 100.643,00 148.565,37
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 2.566.623,15 2.225.647,15
III.B Written futures and forward contracts -265.473,30
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -197.024,70 6.031,10 C. Shares and similar instruments a) Shares 53.513,85 1.686.411,03 b) Closed-end undertakings for collective
investment 2.254,68 9.770,28
D. Other securities 24,73 E. Open-end undertakings for collective investment 11.896.800,80 -3.745.467,37 F. Derivative financial instruments l) Financial indices Futures and forward contracts 259.845,01 141.871,60 m) Derivative financial instruments Swap contracts (+/-) 82.421,04 G. Receivables, deposits, cash at bank and in hand
and payables 0,01
H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -13.142,32 b) Other foreign exchange positions and
transactions -396.127,39 -57.347,41
II. Investment income and expenses A. Dividends 32.916,88 132.684,79 B. Interests a) Securities and money market instruments 267.863,10 43.382,93 b) Cash at bank and in hand and deposits 1.880,25 11.684,64 c) Collateral (+/-) 0,65 C. Interest on borrowings (-) -1.692,61 -4.894,41
III. Other income B. Other 4.042,60
IV. Operating expenses A. Investment transaction and delivery costs (-) -141.792,48 -68.383,64 B. Financial expenses (-) -1.504,35 -3.905,69 C. Custodian's fee (-) -4.334,73 -31.334,78 D. Manager's fee (-) a) Financial management -37.538,66 -121.625,74 b) Administration and accounting management -88.500,62 -105.113,08 E. Administrative expenses (-) -93,82 F. Formation and organisation expenses (-) -12.100,21 -271.838,57 G. Remuneration, social security charges and
pension -7,35 -18,86
H. Services and sundry goods (-) -15.777,15 -64.949,85 J. Taxes -4.385,86 -8.772,63 K. Other expenses (-) -7.777,75 -13.643,26
Income and expenditure for the period Subtotal II + III + IV -12.845,36 -502.684,90
V. Profit (loss) on ordinary activities before tax 11.593.274,57 -2.378.969,89
VII. Result for the period 11.593.274,57 -2.378.969,89
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 20.020.355,34 8.467.055,62 Profit (loss) brought forward from the previous
financial year 8.442.358,17 10.805.986,55
Profit for the period available for appropriation 11.593.274,57 -2.378.969,89 Income on the creation of shares (income on the
cancellation of shares) -15.277,40 40.038,96
II. (Appropriations to) Deductions from capital -20.013.246,57
III. Profit (loss) to be carried forward 8.442.358,17
IV. (Dividends to be paid out) -7.108,77 -24.697,45
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND WORLD
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Closed-end funds
Listed closed-end investment funds
Belgium
KBC ECO FUND WATER IS B KAP 1.142,00 EUR 731,250 835.087,50 0,51 1,01 1,00
KBC EQUITY FUND AMERICA IS B KAP 7.102,00 USD 1.525,100 8.215.458,28 2,67 9,89 9,86
KBC EQUITY FUND BUYBACK AMERICA IS B KAP 1.557,00 USD 1.025,240 1.210.784,80 0,70 1,46 1,45 KBC EQUITY FUND COMMODITIES & MATERIALS IS B KAP
3.862,00 EUR 473,090 1.827.073,58 1,85 2,20 2,19
KBC EQUITY FUND CONSUMER DURABLES IS B KAP 1.650,00 EUR 347,130 572.764,50 1,63 0,69 0,69
KBC EQUITY FUND EUROZONE IS B KAP 36.783,00 EUR 348,010 12.800.851,83 2,56 15,43 15,36
KBC EQUITY FUND FINANCE IS B KAP 17.663,00 EUR 380,660 6.723.597,58 2,14 8,10 8,07 KBC EQUITY FUND FOOD & PERSONAL PRODUCTS IS B KAP
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND WORLD (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 28.410.682,60 17.026.051,72 45.436.734,32 Sales 31.620.882,65 29.808.487,96 61.429.370,61 Total 1 60.031.565,25 46.834.539,68 106.866.104,93 Subscriptions 4.288.490,82 681.660,10 4.970.150,92 Redemptions 7.527.732,96 13.619.084,84 21.146.817,80 Total 2 11.816.223,78 14.300.744,94 26.116.968,72 Monthly average of total assets
92.098.780,85 89.100.666,95 90.599.723,90
Turnover rate 52,35 % 36,51 % 89,13 %
1st half of year 2nd half of year YearPurchases 28.410.682,60 17.026.051,72 45.436.734,32 Sales 31.620.882,65 29.808.487,96 61.429.370,61 Total 1 60.031.565,25 46.834.539,68 106.866.104,93 Subscriptions 4.288.490,82 681.660,10 4.970.150,92 Redemptions 7.527.732,96 13.619.084,84 21.146.817,80 Total 2 11.816.223,78 14.300.744,94 26.116.968,72 Monthly average of total assets
91.396.560,40 88.647.942,05 90.175.144,00
Corrected turnover rate 52,75 % 36,70 % 89,55 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
CAP BE6213775529 EUR 13.29% 7.89% -2.50% 1.96% 05/04/1991 2.97%
DIV BE6213776535 EUR 13.29% 7.90% -2.50% 1.96% 05/04/1991 2.51%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). the return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
where C is a factor that is determined for all N dividends between the calculation date D and the reference date. For dividend i on date Di with value Wi:
Ci = [Wi / NAV(Di)] + 1 i = 1 ... N
from which C = C0 * .... * CN. If the interval between the two dates exceeds one year, the ordinary return calculation is
converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares. Dividend on ex-dividend date 28/03/2013: 0.23 EUR net (0.31 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Distribution: 0.29% Capitalization: 1.531% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CSFBSAS 276 147 53.33%
JP MORGAN 28 16 55.54%
MORGAN STANLEY 8 4 50.02%
UBSWDR 8 4 55.57%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The Euro Stoxx 50 is a weighted equity index computed by Stoxx Ltd. The dividend is not reinvested. The main purpose of this index is to provide a continuous indication of market trends on the European stock markets. The base value of the index is 1000, calculated on the basis of the underlying prices recorded on 31 December 1991. The Euro Stoxx 50 consists solely of shares from countries participating in the Economic and Monetary Union, with the exception of Luxembourg. On 10 April 1998, the following stock exchanges were included in the index: Austria (Vienna), Belgium (Brussels), Finland (Helsinki), France (Paris), Germany (Frankfurt), Italy (Milan), Ireland (Dublin), the Netherlands (Amsterdam), Portugal (Lisbon) and Spain (Madrid). The index consists of the 50 largest European shares in terms of shares that are freely negotiable, and the shares are accordingly weighted on the basis of this criterion. The Euro Stoxx 50 is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Stoxx Limited has all proprietary rights with repect to the index. In no way Stoxx Limited endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Stoxx Limited disclaims any liability for the issue and offering of the shares of this undertaking for collective investment.
The S&P 500 is an equity index computed by Standard & Poor’s that is made up of 500 shares. The dividend is not reinvested. The S&P 500 serves primarily as a continuous indicator of market trends on the US stock markets. The value of the S&P 500 index is calculated on the basis of the market value of the shares of 500 companies at a given point in time, compared to the market value of the shares of 500 similar companies during the reference period from 1941 to 1943. The index is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Standard & Poor’s has all proprietary rights with repect to the index. In no way Standard & Poor’s endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Standard & Poor’s disclaims any liability for the issue and offering of the shares of this undertaking for collective investment The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service.
Name Maximum management feeKBC Eco Fund-Water-Institutional B Shares 1,50 KBC Equity Fund-America-Institutional B Shares 1,50 KBC Equity Fund-Buyback America-Institutional B Shares 1,50 KBC Equity Fund-Commodities & Materials-Institutional B Shares 1,50 KBC Equity Fund-Consumer Durables-Institutional B Shares 1,50 KBC Equity Fund-Eurozone-Institutional B Shares 1,50 KBC Equity Fund-Finance-Institutional B Shares 1,50 KBC Equity Fund-Food & Personal Products-Institutional B Shares 1,50 KBC Equity Fund-Growth by Innovation-Institutional B Shares 1,50 KBC Equity Fund-High Dividend-Institutional B Shares 1,50 KBC Equity Fund-High Dividend New Markets-Institutional B Shares 1,50 KBC Equity Fund-High Dividend North America-Institutional B Shares 1,50 KBC Equity Fund-Industrials & Infrastructure-Institutional B Shares 1,50 KBC Equity Fund-Millennium-Institutional B Shares 1,50 KBC Equity Fund-New Asia-Institutional B Shares 1,60 KBC Equity Fund-Oil-Institutional B Shares 1,50 KBC Equity Fund-Pacific-Institutional B Shares 1,50 KBC Equity Fund-Pharma-Institutional B Shares 1,50 KBC Equity Fund-Quant EMU-Institutional B Shares 1,50 KBC Equity Fund-Quant Europe-Institutional B Shares 1,50 KBC Equity Fund-Satellites-Institutional B Shares 1,50 KBC Equity Fund-Technology-Institutional B Shares 1,50 KBC Equity Fund-Telecom-Institutional B Shares 1,50 KBC Equity Fund-Europe 1,50 KBC Multi Track-Germany 0,70 KBC Equity Fund-World 1,50
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to –568,84 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Latin America
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND LATIN AMERICA
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 28 January 1994 Initial subscription price: 20000 BEF Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of companies in Latin American countries where conditions are such as to ensure accelerated economic growth in the short or medium term. This may involve the use of Depository Receipts, including ADRs and GDRs. Investors should note that the sub-fund may invest up to 100% of its assets in Depository Receipts.
RISK CONCENTRATION Latin American shares.
INDEX-TRACKING: The object of the sub-fund is to track the composition of an index within the meaning and limits of Article 37 of the Royal Decree of 4 March 2005. Index/indices in question: MSCI Latin America. Index tracking method: Optimised Sampling: the index is tracked using a selection of shares in the index in order to best replicate the index. In addition, an optimisation algorithm is used that balances the risk and the return of each of the portfolio positions, so optimising the selection.
If the composition of the index is no longer sufficiently diversified or if the index is no longer sufficiently representative of the market it relates to or if the value and composition of the index is no longer published in a suitable manner, the management company will inform the Board of Directors without delay. The Board of Directors will consider what action to take in the interest of investors and may convene a general meeting of shareholders in order to amend the investment policy.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR The KBC Equity Fund Latin America invests directly in local Latin American markets as well as ADRs and GDRs where necessary. The fund invests in the following markets with approximately the accompanying proportions: Brazil (59%), Mexico (23%), Chile (9%), Colombia (5%), Peru (3%) and Argentina (1%). The largest holdings are Petrobras, Vale and America Movil. The fund’s NAV rose from 1344.71 to 1393.41 in 2012. Latin American equities had a positive returns in 2012 but failed to outperform global equity markets in the euro terms. A large discrepancy in the returns is evident. Colombia and Mexico were top performers with very strong, double-digit returns. Brazilian stock market was a clear laggard and had negative returns. On a sector basis, Industrials and Consumer Staples were top performers while Energy stocks lagged behind.
Over the first half of the 2012, the changing situation in Europe was the primary concern for investors who were in a risk-on/risk-off mode depending primarily on the Eurozone developments. Throughout the first quarter, the situation in Europe continued to improve and markets performed strongly. Investors accepted the Greek sovereign debt swap offer and the European Central Bank agreed to provide direct support to troubled European banks. Economists were of opinion that China, the most important trading partner for Brazil and receiver of its commodities-based exports, will experience a slowdown in growth but not an outright recession. The global situation worsened in the second quarter of the year. In France, anti-austerity measures of a newly elected president were in opposition to the so-far dominating view advocated by German Chancellor Angela Merkel and resulted in a widening of an already existing rift in European policy. Investors were concerned that Greece, following local parliamentary elections, may leave the Eurozone and return to its old currency, the drachma and cause an uncontrolled breakup of the European Monetary Union. Contagion fears spread to another weak link in a European chain – Spain. Its macroeconomic numbers continued to disappoint and Madrid was forced to ask for an assistance as costs of financing in capital markets were too high. Political issues were not the only force behind declines in equities. First half of the year saw a substantial deterioration in macro data globally – not only in Europe that remained in the spotlight, but also in the US and China. As a consequence, markets were very weak and in a risk-off mode, with most risk assets reversing the gains achieved in first months of the year. At the start of the second half of the year, markets moved considerably upwards although the first days of the third quarter brought even more disappointing macroeconomic news. The US growth forecast was downgraded and problems in the Eurozone continued. The equity rally gained momentum towards the end of the summer on anticipation that central banks worldwide, and the American monetary authority in particular, will start a new round of monetary easing. The expectations proved to be true when the US Fed announced QE3 in September, along with the aim of keeping interest rates low until at least the middle of 2015. In the final quarter of the year, markets gained some positive momentum in its final months on the expectation that a political resolution of ‘fiscal cliff’ issue in the United States would be found and cuts in government spending and increases in taxes, which would likely prompt the US economy into recession, would be avoided. Other main news over the period were successful leadership transition in China and elections in Japan. In Brazil, economic activity disappointed in 2012. At the start of the year, market watchers were quite upbeat about prospects for Latin America’s largest economy and expected GDP growth to come in at 3.4% for the full year. However, economic data continued to come in below expectations, the awaited economic recovery failed to materialise and GDP forecasts had to be revised down accordingly. The most recent forecast for 2012 GDP growth is a lacklustre 1%. For Brazilian investors, who became used to an annual GDP growth above 4% over last 10 years, this negative review caused quite some concerns. On a monetary policy front, the benchmark interest rate, the Selic, finished year at 7.25%, an all-time historic low, down from 11% at the start of the year. The slowdown in economic activity was recognised early by the Brazilian Central Bank which proved to be very proactive in their monetary response and the interest rate has been decreased by a total of 500 basis points since the summer of 2011. However, interest rate cuts and substantial counter-cyclical fiscal policy promoted by the Brazilian government failed to have a substantial and lasting impact on the Brazilian economy, reinforcing the opinion that recent deterioration in economic activity is not short-term, cyclical and driven by global macroeconomic factors and but rather of more structural, domestic and long-term nature. Especially given the fact, that Brazil’s economic activity remained somewhat at odds with its Latin American peers, particularly Mexico, which is expected to record a healthy growth rate of 3.8% in 2012. Although the headline economic data is disappointing, there are some signs that the economy is turning the corner as industrial business confidence improved in a final quarter of 2012. Household spending, one of the pillars of economic growth in 2012, is expected to remain strong as consumer confidence rose to a level close to its historical peak. Labour market conditions tightened even more and continue to defy Brazil’s disappointing economic reality. The unemployment is 4.9% at the end of the year, the second lowest in the series. Together with a 9% increase in the minimum wage, it is expected to provide an additional boost to a household consumption that is already growing at a healthy rate. However, the growth in labour’s productivity remains disappointing and heated labour market conditions may translate into inflationary pressures in 2013. For now though, inflation remains within a target range set by the Brazilian Central Bank, although closer to its upper limit. Inflation is always a topic that should be looked at in Brazil, given the history of price instability. However for now, market participants expect it will not be an issue for the central bank and that the benchmark interest rate will remain unchanged in 2013. Moreover, they anticipate an uptick in the economic activity in 2013 with market consensus for economic growth of 3.5% for the full year.
Over the last decade, dubbed as ‘a decade of emerging markets’, Mexico’s growth was quite disappointing and in line with the US growth rather than similar to its emerging markets peers. In 2012, however, Mexican equities substantially outperformed other Latin American and emerging market equities on a premise that after presidential elections ambitious structural reforms will be implemented. Market watchers believe that probability is quite high that aggressive reforms agenda will be advanced and local equities and a currency trade at a premium to other Latin American markets as they already started to price in the positive impact that reforms will have on boosting Mexico’s competitiveness and long-term growth prospects.
2.1.8 FUTURE POLICY Overall, equity markets were quite volatile during the first months of 2012 and while some concerns eased in the second half of the year, the volatility is likely to continue going forward. Although, the political situation, especially in Europe, improved somewhat recently, assets prices are still driven mainly by political news and changes in market sentiment. Investors are likely to continue switching between risk-on and risk-off modes depending on developments in political and macroeconomic situation. Historically, emerging markets equities are more volatile than their counterparts in developed markets as their prices are more sensitive to changes in global macroeconomic data and investors’ sentiment towards risk assets. This is likely to continue to prove true for equities in Latin America and particularly in Brazil, which is more intertwined in the global economy than its smaller local peers. Brazil’s largest companies are reliant on the global macroeconomic situation as their fortunes tend to be more dependent on commodity-oriented exports. We do continue to believe, however, that the global economic picture is getting stronger. Moreover, a substantial part of the slowdown in the Brazilian economy appears to be priced in at current valuations. In the mid to long term, we believe that Latin America will be one of the major beneficiaries of global economic recovery, partly as the region was exposed to very few structural imbalances that came to light during the financial crisis of 2008 and partly as demographic dynamics and credit penetration have room to evolve further. On a final note, investors should be aware of the high risk and volatility associated with investing in emerging markets such as Latin America.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 42.118.031,75 43.853.809,22
II. Securities, money market instruments, UCIs and derivatives
C. Shares and similar instruments a) Shares 41.897.515,81 43.585.981,21 D. Other securities 1.043,45 1,85
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 146.366,06 1.850,93 B. Payables a) Accounts payable (-) -78.767,50 -27.948,68 c) Borrowings (-) -75.801,02
V. Deposits and cash at bank and in hand A. Demand balances at banks 60.840,29 117.436,07
VI. Accruals and deferrals A. Expense to be carried forward 3.317,98 B. Accrued income 203.591,82 224.421,26 C. Accrued expense (-) -36.757,16 -51.251,40
TOTAL SHAREHOLDERS' EQUITY 42.118.031,75 43.853.809,22
A. Capital 12.662.557,99 15.879.770,65
B. Income equalization -40.941,23 -293.389,88
C. Profit(Loss) carried forward 27.918.245,72 45.690.806,52
D. Result for the period 1.578.169,27 -17.423.378,07
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 3.889.854,88 -13.310.084,21 D. Other securities 1.092,67 -6.071,31 G. Receivables, deposits, cash at bank and in hand
and payables -0,29 -0,01
H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -2.862.754,00 -5.006.777,62
II. Investment income and expenses A. Dividends 1.328.921,06 2.163.797,31 B. Interests a) Securities and money market instruments 31,01 8.555,33 b) Cash at bank and in hand and deposits 353,16 1.946,29 C. Interest on borrowings (-) -1.186,94 -2.881,50
III. Other income B. Other 5.230,04
IV. Operating expenses A. Investment transaction and delivery costs (-) -46.303,28 -88.349,53 B. Financial expenses (-) -686,58 -2.246,13 C. Custodian's fee (-) -38.657,41 -66.894,80 D. Manager's fee (-) a) Financial management -638.253,35 -975.454,78 b) Administration and accounting management -43.521,51 -67.115,72 E. Administrative expenses (-) -237,68 -109,64 F. Formation and organisation expenses (-) -4.954,93 -7.210,98 G. Remuneration, social security charges and
pension -3,38 -14,46
H. Services and sundry goods (-) -8.712,65 -14.765,33 J. Taxes 11.925,74 -36.347,51 K. Other expenses (-) -8.737,25 -18.583,51
Income and expenditure for the period Subtotal II + III + IV 549.976,01 899.555,08
V. Profit (loss) on ordinary activities before tax 1.578.169,27 -17.423.378,07
VII. Result for the period 1.578.169,27 -17.423.378,07
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 29.455.473,76 27.974.038,57 Profit (loss) brought forward from the previous
financial year 27.918.245,72 45.690.806,52
Profit for the period available for appropriation 1.578.169,27 -17.423.378,07 Income on the creation of shares (income on the
cancellation of shares) -40.941,23 -293.389,88
II. (Appropriations to) Deductions from capital -29.416.539,19
III. Profit (loss) to be carried forward 27.918.245,72
IV. (Dividends to be paid out) -38.934,57 -55.792,85
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND LATIN AMERICA
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND LATIN AMERICA (IN
THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 6.332.238,40 9.540.675,80 15.872.914,20 Sales 10.533.095,21 8.074.953,29 18.608.048,50 Total 1 16.865.333,61 17.615.629,09 34.480.962,70 Subscriptions 6.276.588,78 7.602.410,26 13.878.999,04 Redemptions 11.539.370,27 6.102.550,71 17.641.920,98 Total 2 17.815.959,05 13.704.960,97 31.520.920,02 Monthly average of total assets
47.205.217,76 41.608.418,98 44.406.818,37
Turnover rate -2,01 % 9,40 % 6,66 %
1st half of year 2nd half of year YearPurchases 6.332.238,40 9.540.675,80 15.872.914,20 Sales 10.533.095,21 8.074.953,29 18.608.048,50 Total 1 16.865.333,61 17.615.629,09 34.480.962,70 Subscriptions 6.276.588,78 7.602.410,26 13.878.999,04 Redemptions 11.539.370,27 6.102.550,71 17.641.920,98 Total 2 17.815.959,05 13.704.960,97 31.520.920,02 Monthly average of total assets
49.026.582,72 40.651.435,76 41.855.807,14
Corrected turnover rate -1,94 % 9,62 % 7,07 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS Nil
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). the return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
where C is a factor that is determined for all N dividends between the calculation date D and the reference date. For dividend i on date Di with value Wi:
Ci = [Wi / NAV(Di)] + 1 i = 1 ... N
from which C = C0 * .... * CN. If the interval between the two dates exceeds one year, the ordinary return calculation is
converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares. Dividend on ex-dividend date 28/03/2013: 9.40 EUR net (12.53 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Distribution: 1.644% Capitalization: 1.648% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 6,836 3,709 54.26%
CSFBSAS 1,220 763 62.50%
DEUTSCHE 12,261 6,573 53.61%
MERRILL 229 143 62.50%
MORGAN STANLEY 3,529 1,845 52.29%
NOMURA 3,766 2,008 53.31%
UBSWDR 930 582 62.50%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.6% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.6% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to -31,01 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Flanders
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND FLANDERS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 27 June 1997 Initial subscription price: 20000 BEF Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED The assets are invested primarily in shares with a Flemish character where conditions are such as to allow accelerated economic growth in the short or medium term.
RISK CONCENTRATION Shares with a Flemish character.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive.
A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Real GDP in the EMU contracted by an annualised 0.3%. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany played its traditional role as European economic engine to a lesser extent than in the recent past. Greater divergence within Europe resulted primarily in a further decline in unemployment in Germany and an alarmingly rapid rise in joblessness in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery. The European debt crisis continued to hang over the economy of the EMU in 2012 like the sword of Damocles. Following the ECB's long-term refinancing operations (LTROs) of December 2011 and February 2012, it appeared for a short while as though the central bank had pumped enough cash into the financial markets to take away the uncertainty for a time, but the numbing effect of these LTROs proved to be short lived. The flaring up of problems with the banks in Spain and speculation about Greece exiting the euro area caused the crisis to explode again in the second quarter of 2012. During the summer months the Belgian shares responded positively to the statement by Mario Draghi, the President of the European Central Bank, that the euro would be defended at any cost. In September the ECB launched its Outright Monetary Transactions (OMT) programme, under which unlimited purchases will be made of short-dated (up to three years) government bonds issued by struggling countries, provided certain conditions are met. Following a consolidation the Bel20 continued its rally in the second half of the fourth quarter.
KBC Equity Fund Flanders shareholders obtained a positive return (in euros) of more than 32% in 2012. The fund performed significantly better than the Bel20 index thanks to the relatively good performance of, among others, Thrombogenics, Jensen, Galapagos, Kinepolis, Arseus, Exmar and Barco. The positions in Bekaert, Nyrstar and Realdolmen dragged down the fund’s relative performance. Within the Bel20 KBC and Ageas recorded the strongest performance. Solvay and AB InBev, which acquired the Mexican market leader Modelo, were once again star performers. D’Ieteren, Mobistar and especially Delhaize, which is grappling with structural problems in its two main markets, were the main disappointments during the period under review.
2.1.8 FUTURE POLICY Europe remains in a low-growth environment, with no underlying inflationary pressure, low interest rates and runaway public finances. The need to strengthen its internal mechanisms is becoming a matter of urgency for the euro area. This involves measures such as supranational supervision of banks, strict monitoring and sanctioning of budgetary policy, monitoring of pay policy and harmonising European taxation. There is no urgent macroeconomic reason to increase the exceptionally low money market rates so long as the economic situation in the West remains weak and there is no sign of any real inflationary pressures. KBC Equity Fund Flanders focuses primarily on Flemish stocks with above-average growth potential in the years ahead. This means, for instance, large Flemish companies like AB InBev, KBC, Ackermans & van Haaren and Colruyt, cyclical and growth stocks such as Bekaert, Nyrstar, CMB, Euronav, Barco, Recticel and Melexis, and pharmaceutical and biotech companies like Arseus, Thrombogenics, Galapagos and Ablynx, and a number of defensive stocks such as Van de Velde and Miko. The fund also invests in a number of company-specific themes, such as CFE, Tessenderlo Chemie, Sipef and Kinepolis. The evolution of the European debt crisis and the associated credibility of the euro remain crucial to share price trends in the European and Belgian banking sectors. This problem remains as serious as ever due to the approach adopted by European leaders. We will be monitoring this closely.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 21.204.926,27 16.034.137,81
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 145.852,46 139.864,73 C. Shares and similar instruments a) Shares 20.454.665,62 15.673.677,78 Of which securities lent 134.640,62 152.551,67 b) Closed-end undertakings for collective
investment 13.486,20 11.238,50
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 26.264,34 97,66 b) Tax assets 262.220,92 267.195,40 B. Payables a) Accounts payable (-) -61.632,17 -1,42 d) Collateral (-) -145.852,46 -139.864,73
V. Deposits and cash at bank and in hand A. Demand balances at banks 538.934,07 94.687,02
VI. Accruals and deferrals A. Expense to be carried forward 1.049,99 B. Accrued income 66,33 2.395,99 C. Accrued expense (-) -29.079,04 -16.203,11
TOTAL SHAREHOLDERS' EQUITY 21.204.926,27 16.034.137,81
A. Capital 8.764.795,69 9.107.345,16
B. Income equalization -26.088,49 -36.649,68
C. Profit(Loss) carried forward 6.904.253,30 13.586.603,23
D. Result for the period 5.561.965,77 -6.623.160,90
IX Financial instruments lent 134.640,62 152.551,67
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 5.374.321,25 -6.782.088,29 b) Closed-end undertakings for collective
investment 2.247,70 -1.324,96
D. Other securities -0,67 -12,79 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -4,17 8,68
II. Investment income and expenses A. Dividends 541.342,14 559.351,34 B. Interests a) Securities and money market instruments 3.380,04 7.894,27 b) Cash at bank and in hand and deposits 981,77 2.827,51 C. Interest on borrowings (-) -968,48 -7.680,01
III. Other income B. Other 1.332,24
IV. Operating expenses A. Investment transaction and delivery costs (-) -39.962,21 -47.319,60 B. Financial expenses (-) -253,48 -1.969,13 C. Custodian's fee (-) -13.597,92 -22.256,04 D. Manager's fee (-) a) Financial management -260.019,11 -284.979,77 b) Administration and accounting management -19.685,33 -21.454,87 E. Administrative expenses (-) -97,99 -59,84 F. Formation and organisation expenses (-) -1.635,59 -2.562,98 G. Remuneration, social security charges and
pension -5,17
H. Services and sundry goods (-) -4.004,46 -4.765,19 J. Taxes -16.280,74 -15.271,78 K. Other expenses (-) -3.796,98 -2.824,52
Income and expenditure for the period Subtotal II + III + IV 185.401,66 160.256,46
V. Profit (loss) on ordinary activities before tax 5.561.965,77 -6.623.160,90
VII. Result for the period 5.561.965,77 -6.623.160,90
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 12.440.130,58 6.926.792,65 Profit (loss) brought forward from the previous
financial year 6.904.253,30 13.586.603,23
Profit for the period available for appropriation 5.561.965,77 -6.623.160,90 Income on the creation of shares (income on the
cancellation of shares) -26.088,49 -36.649,68
II. (Appropriations to) Deductions from capital -12.417.031,42
III. Profit (loss) to be carried forward 6.904.253,30
IV. (Dividends to be paid out) -23.099,16 -22.539,35
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND FLANDERS
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Closed-end funds
Listed closed-end investment funds
Belgium
QUEST FOR GROWTH - 2.366,00 EUR 5,700 13.486,20 0,07 0,06
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND FLANDERS (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 13.348.216,68 7.928.245,63 21.276.462,30 Sales 11.522.258,81 10.347.537,76 21.869.796,58 Total 1 24.870.475,49 18.275.783,39 43.146.258,88 Subscriptions 3.688.336,23 1.787.395,36 5.475.731,59 Redemptions 2.186.973,35 3.631.729,29 5.818.702,64 Total 2 5.875.309,58 5.419.124,65 11.294.434,23 Monthly average of total assets
19.155.996,02 20.777.279,77 19.973.123,03
Turnover rate 99,16 % 61,88 % 159,47 %
1st half of year 2nd half of year YearPurchases 13.348.216,68 7.928.245,63 21.276.462,30 Sales 11.522.258,81 10.347.537,76 21.869.796,58 Total 1 24.870.475,49 18.275.783,39 43.146.258,88 Subscriptions 3.688.336,23 1.787.395,36 5.475.731,59 Redemptions 2.186.973,35 3.631.729,29 5.818.702,64 Total 2 5.875.309,58 5.419.124,65 11.294.434,23 Monthly average of total assets
18.859.565,63 19.766.094,87 19.044.666,99
Corrected turnover rate 100,72 % 65,04 % 167,25 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 145.852,46 145.852,46 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
CAP BE0164243223 EUR 32.83% 5.85% -0.87% 0.1119 27/06/1997 7.22%
DIV BE0164244239 EUR 32.83% 5.85% -0.87% 0.1117 27/06/1997 7.21%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). the return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
where C is a factor that is determined for all N dividends between the calculation date D and the reference date. For dividend i on date Di with value Wi:
Ci = [Wi / NAV(Di)] + 1 i = 1 ... N
from which C = C0 * .... * CN. If the interval between the two dates exceeds one year, the ordinary return calculation is
converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares. Dividend on ex-dividend date 28/03/2013: 7.73 EUR net (10.31 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Distribution: 1.612% Capitalization: 1.611% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 324 144 44.44%
CSFBSAS 139 62 44.45%
DEUTSCHE 4,517 2,250 49.81%
NOMURA 282 141 50.00%
SOCGEN 106 53 50.00%
UBSWDR 230 115 50.00%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek.
Name Maximum management feeKBC Equity Fund-Flanders 1,50
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 5.642,90 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
BEKAERT EUR 6.155 21,875 134.640,62
Total 134.640,62
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 18.000 EUR 19.844,50
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 103.000 EUR 115.412,84
FRANCE - 08/14 3.00% 12/07 EUR 10.000 EUR 10.595,12
Total 145.852,46 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Utilities
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND UTILITIES
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 31 December 1998 Initial subscription price: 20000 BEF Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of public utility companies in countries where conditions are such as to ensure accelerated economic growth in the short or medium term.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive.
A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate throughout 2012. The debt crisis in Europe continued to rage unabated. Five euro countries requested a bailout from the European emergency fund. Greece reached agreements with its private sector creditors on two occasions in the span of one year on restructuring the bond debt it owes them. Spain found itself in the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the existence of the euro was not at issue. A new feature of this crisis compared to previous ones is that government paper, which had previously been seen as entirely risk-free, also started to be tainted with a degree of credit risk. What started as an isolated problem on the periphery of the euro area developed into an issue concerning the credibility of the monetary union and its institutions. In autumn 2009 – three years ago already – it became clear that Greece's official statistics had painted a highly flattering picture of its public finances; as a result, bond investors lost confidence and many refused to continue to fund Greece. After Greece had elaborated its own bailout programme (April 2010), it rapidly became clear that the EMU needed a structured bailout framework. This initially took the form of the European Financial Stability Facility (EFSF, May 2010) and from 1 October 2012 the permanent European Stability Mechanism (ESM), a fully-fledged supranational institution with its own legal personality. The Greek debacle and lack of political consensus on a blueprint for a renewed currency union continued to fuel mistrust among bond investors. Ireland (November 2010), Portugal (April 2011), once again Greece (July 2011), Cyprus (June 2012) and Spain (with the bailout fund for the banks in June 2012) had to concede that they were no longer able to raise funds in the market and took shelter under the European umbrella. In the course of 2012 the markets shifted their attention from Greece to Spain. The Spanish government has already drawn on the EFSF for the recapitalisation of its banks. In the meantime other problems are also attracting attention: the recession is deeper than had been thought, the austerity policy was already revised as many as four times in the course of 2012 and regional finances are seriously dislocated. In a lengthy address on 3 August, Prime Minister Mariano Rajoy once again emphasised the severity of the situation and drew the attention of the Spanish people to their responsibilities, while also not ruling out immediate cooperation with the EFSF. By the end of the period under review, no formal application for aid had, however, been filed.
Public finances have gone off the rails not only in the EMU, but also in the UK and the US. The budget debate in the US has become mired in a political impasse. The divisions between Republicans and Democrats are considerable and are ideologically driven. Aware of their inability to work out a policy and fearful that the stalemate could lead to an uncontrolled explosion in debt, the parties passed automatic spending cuts into legislation to reduce the budget deficit over a period of ten years to 3% of GDP. In extremis the retiring Congress decided on New Year's Day to delay automatic spending cuts until 1 March 2013. As public-sector finances threatened to run out of control, many European countries looked to levy higher taxes on their utilities. The most striking example in Southern Europe was Italy, which didn’t waste much time introducing its so-called ‘Robin Hood tax’. In the first half of the year, it became evident in Spain that the utilities companies could not count on full payment of the assets the sector has outstanding with the government (known as the 'tariff deficits'). The 2011 Fukushima disaster in Japan continued to reverberate in 2012. Its consequences have been felt by the nuclear industry in Europe in particular. In Germany, a nuclear tax and gradual closure of nuclear plants have been imposed. There was little or no fuss about nuclear power generation in the US and especially the emerging markets. However, with the emergence of shale gas in the US gas prices are at record low levels and operators are switching to gas for their electricity production.
2.1.8 FUTURE POLICY We remain fairly cautious about the fundamental outlook for the industry. The slowdown in growth in Europe is not such as to cancel out the overcapacity that currently exists in the electricity market straight away. We also fear that the sector will remain the victim in the near term of declining government finances. Current valuations in the United States therefore strike us as a little too generous. For the time being, we prefer a healthy mix of defensive, generally regulated businesses with a stable income flow. On the other hand, businesses with strong growth potential also have a place in the fund. These activities are frequently found in the emerging countries. We view the sector as attractive for longer-term investors. The high dividends have a lot to do with that. The debt reduction carried out by most companies translates into healthy balance sheets. Growth in emerging countries remains strong. A crucial factor is the systematic disappearance of the current overcapacity in Europe, which will result in robust price-setting.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 20.271.755,08 25.072.270,74
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 1.336.643,55 208.965,62 C. Shares and similar instruments a) Shares 20.561.119,88 23.501.352,94 Of which securities lent 775.638,82 291.638,36 F. Derivative financial instruments n) Derivative financial instruments Swap contracts (+/-) 34.200,00 838.110,00
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 2.728,33 4.438,32 b) Tax assets 4.987,00 2.016,00 B. Payables a) Accounts payable (-) -36.643,66 -46.793,15 c) Borrowings (-) -442.804,78 d) Collateral (-) -1.336.643,55 -208.965,62
V. Deposits and cash at bank and in hand A. Demand balances at banks 65.693,17 606.158,83
VI. Accruals and deferrals A. Expense to be carried forward 865,52 B. Accrued income 108.314,80 191.634,83 C. Accrued expense (-) -25.839,66 -25.512,55
TOTAL SHAREHOLDERS' EQUITY 20.271.755,08 25.072.270,74
A. Capital 10.489.736,11 15.239.015,72
B. Income equalization -61.191,41 -79.766,41
C. Profit(Loss) carried forward 9.706.830,66 10.638.582,43
IV Notional amounts of swap contracts (+) 2.000.000,00 2.100.000,00
IX Financial instruments lent 775.638,82 291.638,36
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 158.874,46 -2.169.340,44 D. Other securities 2.288,44 -245.495,06 F. Derivative financial instruments m) Derivative financial instruments Swap contracts (+/-) -135.870,00 761.140,00 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -334.977,05 223.086,08
II. Investment income and expenses A. Dividends 851.669,06 1.091.983,00 B. Interests a) Securities and money market instruments 6.220,69 25.827,75 b) Cash at bank and in hand and deposits 1.497,14 1.336,51 C. Interest on borrowings (-) -772,21 -4.626,63
III. Other income B. Other 70.358,58
IV. Operating expenses A. Investment transaction and delivery costs (-) -22.275,28 -25.658,06 B. Financial expenses (-) -379,94 -1.616,20 C. Custodian's fee (-) -19.651,03 -24.384,71 D. Manager's fee (-) a) Financial management -322.792,19 -365.675,21 b) Administration and accounting management -22.845,23 -26.015,87 E. Administrative expenses (-) -488,41 -649,09 F. Formation and organisation expenses (-) -2.099,93 -2.798,79 G. Remuneration, social security charges and
pension -5,39
H. Services and sundry goods (-) -4.895,03 -5.312,60 J. Taxes -14.830,51 -20.606,21 K. Other expenses (-) -2.293,26 -7.108,66
Income and expenditure for the period Subtotal II + III + IV 446.063,87 705.048,42
V. Profit (loss) on ordinary activities before tax 136.379,72 -725.561,00
VII. Result for the period 136.379,72 -725.561,00
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 9.782.018,97 9.833.255,02 Profit (loss) brought forward from the previous
financial year 9.706.830,66 10.638.582,43
Profit for the period available for appropriation 136.379,72 -725.561,00 Income on the creation of shares (income on the
cancellation of shares) -61.191,41 -79.766,41
II. (Appropriations to) Deductions from capital -9.710.916,17
III. Profit (loss) to be carried forward 9.706.830,66
IV. (Dividends to be paid out) -71.102,80 -126.424,36
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND UTILITIES
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Australia
AGL ENERGY LIMITED - 11.088,00 AUD 15,380 134.288,87 0,65 0,66
ORIGIN ENERGY LTD - 7.000,00 AUD 11,620 64.052,29 0,31 0,32
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND UTILITIES (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 3.903.326,08 1.463.282,84 5.366.608,92 Sales 5.004.532,08 3.846.713,08 8.851.245,15 Total 1 8.907.858,16 5.309.995,91 14.217.854,07 Subscriptions 1.357.807,22 543.989,37 1.901.796,59 Redemptions 3.109.800,02 3.549.670,23 6.659.470,25 Total 2 4.467.607,24 4.093.659,60 8.561.266,84 Monthly average of total assets
24.356.588,35 22.411.477,46 23.384.032,90
Turnover rate 18,23 % 5,43 % 24,19 %
1st half of year 2nd half of year YearPurchases 3.903.326,08 1.463.282,84 5.366.608,92 Sales 5.004.532,08 3.846.713,08 8.851.245,15 Total 1 8.907.858,16 5.309.995,91 14.217.854,07 Subscriptions 1.357.807,22 543.989,37 1.901.796,59 Redemptions 3.109.800,02 3.549.670,23 6.659.470,25 Total 2 4.467.607,24 4.093.659,60 8.561.266,84 Monthly average of total assets
23.856.925,20 24.076.332,40 24.351.402,26
Corrected turnover rate 18,61 % 5,05 % 23,23 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
CAP BE0169742898 EUR -0.71% 1.40% -5.41% 0.0532 31/12/1998 0.52%
DIV BE0169740876 EUR -0.73% 1.38% -5.42% 0.053 31/12/1998 0.50%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). the return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
where C is a factor that is determined for all N dividends between the calculation date D and the reference date. For dividend i on date Di with value Wi:
Ci = [Wi / NAV(Di)] + 1 i = 1 ... N
from which C = C0 * .... * CN. If the interval between the two dates exceeds one year, the ordinary return calculation is
converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares. Dividend on ex-dividend date 28/03/2013: 5.69 EUR net (7.58 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Distribution: 1.694% Capitalization: 1.684% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 227 131 57.86%
CSFBSAS 3,314 1,491 45.00%
DEUTSCHE 1,171 469 40.05%
HSBC 665 302 45.37%
JP MORGAN 237 132 55.55%
MERRILL 106 66 62.50%
MORGAN STANLEY 1,995 929 46.57%
NOMURA 742 325 43.85%
SOCGEN 197 93 47.04%
UBSWDR 2,293 1,209 52.69%
WOOD 248 62 25.00%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 6.542,05 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
FORTIS INC CAD 4.000 34,220 104.273,63
IBERDROLA SA EUR 140.093 4,195 587.690,14
POLSKA GRUPA ENERGETYCZNA SA PLN 18.749 18,210 83.675,05
Total 775.638,82
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FLEMISH COMMUNITY - 09/14 3.75% 31/03 EUR 550.000 EUR 588.506,05
OAT FRANCE 2003 4% 25/04/14 EUR 30.000 EUR 32.391,39
FRANCE 2004 1,60% 25/07/2015 EUR 557.000 EUR 715.746,11
Total 1.336.643,55 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund New Shares
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND NEW SHARES
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 1 April 1999 Initial subscription price: 500 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares that have been admitted for listing on a regulated market, where conditions are such as to allow accelerated economic growth in the short or medium term.
RISK CONCENTRATION Recently listed shares.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive.
A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR KBC Equity Fund New Shares invests in new equity offerings. The NAV of KBC Equity Fund New Share rising from 558.66 EUR on 30th December 2011 to 627.36 EUR on 28th December 2012. The first quarter was heavily influenced by Europe with positive news from Greece as the country secured acceptance of their debt swap offer. The ECB continued to extend liquidity to European banks through the LTRO. In Russia, despite some unrest, Putin won the Russian presidential election. Markets were strong over this period, with global emerging markets outperforming significantly, particularly in January and February. Moving into the second quarter, the situation in Europe worsened. In May, French socialist, Francois Hollande won the French presidential election. Following parliamentary elections in Greece, it was not possible to form a government and a second election was called for mid-June with the uncertainty continuing in the meantime. At this stage, concern spread to the situation in Spain, with growth disappointing further and banks coming under more pressure. Despite initially stating that the country did not need a bailout, by the end of June, Spain had requested assistance from Europe and the IMF. In mid June, the second Greek election took place, with the New Democracy winning narrowly and forming a government. Throughout this period of uncertainty, markets were very weak globally, with most regions reversing most of the gains achieved in Q1. Global emerging markets underperformed their developed peers over this period of weakness. On the final day of the quarter, EU leaders agreed that Europe would support troubled banks directly, without the need for local governments to add to their debt levels, which caused a significant rally in markets. While in the second quarter Equity Fund New Markets reversed a lot of the gains from the first quarter, the fund maintained a positive overall performance for the full first half.
The third quarter had a weak start, with the IMF forecast for 2012 growth in the US being reduced from 2.25% to 2% in the first week of the quarter. Negative headlines continued about the US fiscal cliff as well as the ongoing problems in Euroland. However towards the end of July, markets started to recover and to move upwards. August was a reasonable month for markets, with expectations rising ahead of Bernanke’s speech in Jackson Hole and investors looking to quantitative easing in Europe. Problems continued in Europe, with ongoing concerns and protests against austerity in Greece. September saw a rally in risky assets on the announcement of global policy stimulus. The major event of September occurred on September 13th when the US Fed announced QE3, along with the aim of keeping interest rates low until at least the middle of 2015. The final quarter of 2012 saw a good performance for the Asian region in particular, with the focus returning to domestic issues and in particular the positive news flow from China (discussed further below). Despite concerns on the fiscal cliff ahead at the start of January, markets continued to expect that some sort of resolution would be found on this issue and December saw a strong rise in equity prices. Other positives over the period were the agreement of a bailout for Spanish banks and improved sentiment in Japan following the strong election result. Over the period under review the best performing sectors were Healthcare and IT and the worst performing sectors were Consumer Discretionary and Telecommunication Services. Within the Healthcare sector HCA was a key contributor to performance as the company benefited from a new healthcare law which would give the government the power to tax those without health insurance. HCA deals in areas with a high concentration of uninsured patients making it a huge potential benefactor of this law. Turning to the worst performing sector over the period which was the Consumer Discretionary sector. Within the sector Cho Tai Fook, a Hong Kong jewelry retailer, was the worst performer in the first half of 2012. The company was hit by concerns of slowing economic growth in China together with falling gold prices. However the stock staged a dramatic turnaround in the second half of the year, as luxury sales began to rebound supported by better economic data in China. Looking at the IPO market over 2012, approximately a third of all announced IPOs were pulled during the year. Issuance volumes in the EMEA region were denominated by follow-on offerings in 2012, with the IPO market almost mute in Q2 and Q3, picking up slightly in Q4. IPO issuance activity in Europe picked up in Q4, which was at its highest level since Q2 2011. 12 IPOs larger than $100m priced across the region since the start of October. Looking to the Americas IPO market, an uptick in activity continued throughout the year, having passed APAC as the most active region for the first time since 2009 and issuing more than in 2011. APAC continued to perform well but issuance levels have fallen to the lowest since 2008. Many of the more successful IPOs of 2012 were highly defensive stocks with stable cash flows and attractive dividend yields. In the first quarter on 2012 KBC Equity Fund New Shares participated in two deals, namely Ziggo and DKSH, both of which priced in March. Ziggo, a Dutch cable network operator, raised EUR800m making it the largest European IPO in about a year and the biggest in the Netherlands since 2009. There was a lot of interest in this IPO, which was reported to having been as much as 15 times oversubscribed. Ziggo’s share price is EUR 23.96 at the time of writing, up from an IPO price of EUR18.50. DKSH’s IPO too generated a significant amount of interest. DKSH is a Zurich-based firm which helps companies market and distribute goods in Asia. DKSH’s share price is CHF 69.60 at the time of writing, above its initial listing price of CHF 48.00. In the second quarter of 2012, KBC Equity Fund New Shares participated in the IPO of Haitong Securities, the third largest publicly traded Chinese brokerage. This was to be Hong Kong’s biggest first-time stock sale since Chow Tai Fook Jewellery Group’s listing in December 2011, when it raised approximately USD2bn. Haitong Securities raised USD1.7bn through its listing on the Hong Kong stock exchange. Its share price at the time of writing is HKD 12.76 up from its initial listing price of HKD 10.60. Looking to the US, in mid-May volumes were skewed by the controversial initial public offering of Facebook. The Facebook IPO accounted for almost 50% of the overall issuance in the region over the period. The company raised USD16bn through its listing on the Nasdaq in May. The IPO failed to live up to expectations however, although it has seen some improvement in performance over recent months. Its share price at the time of writing is USD 31.36, down from an initial listing price of USD 38.00. In the fourth quarter of 2012 KBC Equity Fund New Shares participated in one of the largest IPOs of the year, Telefonica Deutschland with an offer size of €1.4bn and a market cap of €6.2bn. Key attractions of this investment were its strong market position, track record of growth and cash flow generation and Telefonica Group’s scale and expertise. The books were cover by the second day of the book-building process. Telefonica Deutschland listing price was EUR 5.60, while today it trades at EUR 5.88. Lastly, at the end of November we also participated in the IPO of Daiwa House REIT Investment Corp. The offering was mush sought after and the REIT priced at the top end of its pricing range. The REIT raised USD 632m
2.1.8 FUTURE POLICY Looking forward, we believe that 2013 will be a year of sluggish and weak growth for the overall global economy. While global growth is expected to be positive it is not anticipated that it will be much more positive when compared to 2012. Developed markets are being highlighted as the point of weakness with only modest expansion expected. The ongoing fiscal crisis in the Eurozone is expected to continue its negative influence on global growth. Despite the European Central Bank’s efforts to control and address the crisis, Europe remains in an unstable condition. Economic releases for the Eurozone countries are not supportive with overall GDP figures expected to continue their decline in 2013. A second cause of concern is the fiscal restructuring as a result of the credit crisis that remains, almost 5 years on, for both the US and Eurozone. Household incomes and corporate and financial sector rebalancing is expected to continue hindering consumption growth in these regions. The fiscal austerity that is being forced upon consumers is making stable domestic growth for many countries virtually impossible. While a political crisis has been averted in the US after a last minute agreement regarding the fiscal cliff, this may only be a short term solution in advance of the debt ceiling debate to follow in February. Inflation is expected to remain contained in developed markets this year allowing monetary policy to focus on growth. In the US, growth is predicted to improve in the second half of the year along with improvement in the housing market and unemployment figures. It would appear that growth in 2013 will emanate from the same source as 2012, with almost 90% of global GDP growth expected to stem from Emerging Markets. Growth is also expected to continue in China where considerable confidence remains, however it is not expected to surpass the growth of 2012. In relation to the BRIC countries, Brazil is expected to exhibit the most improved growth as its economy rebounds as a result of the monetary and fiscal policies introduced this year. The key macro issues facing Emerging Markets in 2013 are the EU sovereign debt crisis, US fiscal policy and Chinese growth. Given the limited number of deals done in 2012, there remains a substantial backlog across all regions, although it is the larger more liquid names which will likely attract most attention, we continue to research the market for new offerings.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 16.421.422,63 16.819.533,53
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 75.196,80 89.019,00 a} Collateral received in the form of bonds 1.082.975,89 C. Shares and similar instruments a) Shares 16.259.019,26 16.183.473,32 Of which securities lent 518.875,15 b) Closed-end undertakings for collective
investment 420.000,00
D. Other securities 7,46 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -625,89 452,76 m) Financial indices Futures and forward contracts (+/-) -288,22 211,83
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 2.951,04 917,19 b) Tax assets 1.565,04 c) Collateral 2.654,73 6.162,38 B. Payables a) Accounts payable (-) -35.766,75 -16.021,30 c) Borrowings (-) -14.628,88 d) Collateral (-) -1.082.975,89
V. Deposits and cash at bank and in hand A. Demand balances at banks 124.097,43 109.147,34
VI. Accruals and deferrals A. Expense to be carried forward 665,65 B. Accrued income 29.511,68 39.770,66 C. Accrued expense (-) -20.698,57 -15.837,80
TOTAL SHAREHOLDERS' EQUITY 16.421.422,63 16.819.533,53
A. Capital 4.886.758,11 7.450.061,14
B. Income equalization -7.526,10 395,13
C. Profit(Loss) carried forward 9.357.251,89 11.139.755,82
D. Result for the period 2.184.938,73 -1.770.678,56
Off-balance-sheet headings
I Collateral (+/-)
I.A Collateral (+/-)
I.A.A Securities/market instruments 1.082.975,89
I.A.B Cash at bank and in hand/deposits 2.654,73 6.162,38
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 108.464,81 192.381,76
IX Financial instruments lent 518.875,15
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -13.822,20 100,80 C. Shares and similar instruments a) Shares 1.231.362,31 -2.627.861,98 b) Closed-end undertakings for collective
investment 9.000,00 16.000,00
D. Other securities -7.673,19 -31.645,45 F. Derivative financial instruments l) Financial indices Futures and forward contracts 15.483,24 211,83 G. Receivables, deposits, cash at bank and in hand
and payables 0,01 -0,01
H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -1.078,65 452,76 b) Other foreign exchange positions and
transactions 835.560,68 818.422,99
II. Investment income and expenses A. Dividends 383.409,67 368.155,49 B. Interests a) Securities and money market instruments 31.855,00 11.993,44 b) Cash at bank and in hand and deposits 2.250,59 2.601,63 c) Collateral (+/-) 3,90 C. Interest on borrowings (-) -743,04 -1.900,27
III. Other income B. Other 448,34
IV. Operating expenses A. Investment transaction and delivery costs (-) -14.543,62 -21.028,14 B. Financial expenses (-) -308,32 -1.396,40 C. Custodian's fee (-) -13.680,99 -16.472,60 D. Manager's fee (-) a) Financial management -236.230,13 -248.466,75 b) Administration and accounting management -16.765,94 -18.264,57 E. Administrative expenses (-) -59,34 F. Formation and organisation expenses (-) -1.541,18 -2.011,94 G. Remuneration, social security charges and
pension -3,67
H. Services and sundry goods (-) -3.770,33 -3.892,14 J. Taxes -12.410,54 -13.631,52 K. Other expenses (-) -1.355,30 -2.494,30
Income and expenditure for the period Subtotal II + III + IV 116.106,53 53.640,50
V. Profit (loss) on ordinary activities before tax 2.184.938,73 -1.770.678,56
VII. Result for the period 2.184.938,73 -1.770.678,56
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 11.534.664,52 9.369.472,39 Profit (loss) brought forward from the previous
financial year 9.357.251,89 11.139.755,82
Profit for the period available for appropriation 2.184.938,73 -1.770.678,56 Income on the creation of shares (income on the
cancellation of shares) -7.526,10 395,13
II. (Appropriations to) Deductions from capital -11.515.393,69
III. Profit (loss) to be carried forward 9.357.251,89
IV. (Dividends to be paid out) -19.270,83 -12.220,50
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND NEW SHARES
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND NEW SHARES (IN
THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 1.533.618,80 2.920.390,46 4.454.009,26 Sales 2.766.141,99 4.128.485,81 6.894.627,80 Total 1 4.299.760,79 7.048.876,27 11.348.637,06 Subscriptions 160.043,22 131.129,52 291.172,74 Redemptions 1.417.928,21 1.437.134,96 2.855.063,17 Total 2 1.577.971,43 1.568.264,48 3.146.235,91 Monthly average of total assets
17.416.279,08 16.767.047,49 17.091.663,28
Turnover rate 15,63 % 32,69 % 47,99 %
1st half of year 2nd half of year YearPurchases 1.533.618,80 2.920.390,46 4.454.009,26 Sales 2.766.141,99 4.128.485,81 6.894.627,80 Total 1 4.299.760,79 7.048.876,27 11.348.637,06 Subscriptions 160.043,22 131.129,52 291.172,74 Redemptions 1.417.928,21 1.437.134,96 2.855.063,17 Total 2 1.577.971,43 1.568.264,48 3.146.235,91 Monthly average of total assets
17.161.345,26 16.652.826,69 16.966.389,80
Corrected turnover rate 15,86 % 32,91 % 48,34 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
CAP BE0170533070 EUR 12.30% 9.03% -3.55% 0.0687 01/04/1999 1.66%
DIV BE0170532064 EUR 12.29% 9.02% -3.55% 0.0686 01/04/1999 1.66%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. the return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
where C is a factor that is determined for all N dividends between the calculation date D and the reference date. For dividend i on date Di with value Wi:
Ci = [Wi / NAV(Di)] + 1 i = 1 ... N
from which C = C0 * .... * CN. If the interval between the two dates exceeds one year, the ordinary return calculation is
converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares. Dividend on ex-dividend date 28/03/2013: 3.10 EUR net (4.13 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Distribution: 1.695% Capitalization: 1.691% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 261 163 62.50%
CSFBSAS 2,863 1,531 53.47%
DEUTSCHE 27 12 44.45%
JP MORGAN 643 357 55.56%
MERRILL 127 79 62.50%
MORGAN STANLEY 962 528 54.93%
NOMURA 283 103 36.36%
UBSWDR 440 220 50.00%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The S&P 500 is an equity index computed by Standard & Poor’s that is made up of 500 shares. The dividend is not reinvested. The S&P 500 serves primarily as a continuous indicator of market trends on the US stock markets. The value of the S&P 500 index is calculated on the basis of the market value of the shares of 500 companies at a given point in time, compared to the market value of the shares of 500 similar companies during the reference period from 1941 to 1943. The index is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Standard & Poor’s has all proprietary rights with repect to the index. In no way Standard & Poor’s endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Standard & Poor’s disclaims any liability for the issue and offering of the shares of this undertaking for collective investment The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 14.279,11 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
DKSH HOLDING LTD CHF 117 65,900 6.389,05
HAITONG SECURITIES CO -H- HKD 272.799 13,300 355.057,56
IBERDROLA SA EUR 24.788 4,195 103.985,66
POWSZECHNY ZAKLAD UBEZPIECZEN SA PLN 499 437,000 53.442,88
Total 518.875,15
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FLEMISH COMMUNITY - 09/14 3.75% 31/03 EUR 550.000 EUR 588.506,05
FRANCE - 04/55 4.00 % 25/04 EUR 81.000 EUR 99.270,60
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 18.000 EUR 20.169,23
Total 1.082.975,88 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Fallen Angels
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND FALLEN ANGELS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Launch date: 30 April 1999 Initial subscription price: 500 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares whose price has fallen significantly compared with their local market but for which the outlook is positive again. The sub-fund focuses on the higher growth potential of the companies concerned, taking account of their undervaluation compared with the local market.
LENDING FINANCIAL INSTRUMENTS: The sub-fund may lend financial instruments within the limits set by law and regulations. This lending does not affect the sub-fund’s risk profile since: - it takes place within the framework of a securities lending system managed by a principal. In
addition, the sub-fund has a relationship only with the principal of the securities lending system which acts as counterparty and to which title of the loaned securities is transferred. The choice of principal is subject to strict selection criteria. The return of securities similar to the securities that have been lent is guaranteed by the principal.
- through a margin management system, the sub-fund is always guaranteed financial security, the actual value of which always exceeds the actual value of the securities that have been lent, in case the principal does not return similar securities.
The return of securities similar to the securities that have been lent can be requested at any time, which means that the lending of securities does not affect the management of the sub-fund's assets. By lending securities, the sub-fund can generate an additional return. The principal pays a fee to the management company. After deducting the fee for the margin management and clearing services of KBC Bank, most of this fee is paid to the sub-fund. The relationship with the counterparty or counterparties is governed by standard international agreements. More information is provided on the terms and conditions governing securities lending in the annual or half-yearly report for the sub-fund.
VOLATILITY OF THE NET ASSET VALUE: The volatility of the net asset value may be high due to the composition of the portfolio.
GENERAL STRATEGY FOR HEDGING THE EXCHANGE RATE RISK: In order to protect its assets against exchange rate fluctuations and within the limitations laid down in the articles of association, the sub-fund may perform transactions relating to the sale of forward currency contracts, as well as the sale of call options and the purchase of put options on currencies. The transactions in question may relate solely to contracts traded on a regulated market that operates regularly, is recognised and is open to the public or that are traded with a recognised, prime financial institution specialising in such transactions and dealing in the over-the-counter (OTC) market in options. With the same objective, the sub-fund may also sell currencies forward or exchange them in private transactions with prime financial institutions specialising in such transactions. The hedging objective of the aforementioned transactions suggests that there is a direct link between these transactions and the assets to be hedged, which implies that the transactions carried out in a particular currency may in principle not exceed, in terms of volume, either the valuation value of all the assets in the same currency or the holding period of those assets.
SOCIAL, ETHICAL AND ENVIRONMENTAL ASPECTS:
No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive.
A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR The fund invests in stocks that have for various reasons underperformed their sector or local market index during a relatively long period. Academic research shows that stocks that underperform over a relatively long period become cheap as a result and tend to outperform in the subsequent period of time. History shows that market participants tend to extrapolate the problems of the past on to the future, thereby ignoring the strengths of underperforming and cheap stocks. A hint of good news is sometimes sufficient to again bring these positive elements under the spotlight and can inspire a recovery in the stock price. Moreover, investors tend to lose interest in underperforming stocks and focus rather on the top names of the moment. As a result of this lack of interest, the pricing of these stocks is no longer efficient and this subsequently creates opportunities for bargain hunters. The period of outperformance tends to be surprisingly long which implies that KBC Equity Fund Fallen Angels is characterised as a long-term investor, as opposed to a trading fund. Looking back over the past year, 2012 was equally as tumultuous as the previous year. In January equity markets moved considerably higher. The Fed’s announcement that rates will remain low until at least late 2014, record results from Apple and positive US GDP growth numbers were the key support factors for equity markets. Emerging equity markets led the pack early on. After a short pause in early February, equities climbed higher again in the second half of the month. Regionally, the euro area markets strongly outperformed. Positive macroeconomic developments, especially in the US, the successful Greek debt restructuring and the liquidity injection by central banks encouraged a modest increase in equity markets in March. Towards the end of the month investors’ optimism was tempered by worries over the risks for a hard landing in China and the rise in government bond yields throughout the world.
At the start of the second quarter macro data was not supportive for equity markets. The reporting season for the first quarter was a positive factor with some 75% of US companies (S&P 500) beating expectations. In Europe, there were less positive surprises and, disappointingly earnings were down year-on-year. Euro area equity markets strongly underperformed other regions once again, while Emerging market equities also continued to underperform their Developed Market counterparts. The downward trend on stock markets intensified in May. Uncertainty over Greece and Spain continued to weigh on investors' mood in June. The announcement of plans to enable the European Stability Mechanism to directly capitalise banks rather than direct funds through the sovereign led to sharp gains in the final trading days of the month. European stock markets benefited most from the late rally, strongly outperforming other regions. During July, economic data remained weak for most regions. At the start of July, the IMF reduced its outlook on US economic growth for 2012 and 2013 due to a slowdown in consumer spending and economic demand. Despite the weak economic releases during the month, the ECB stepped in at month end to awaken global markets. August marked a month of improvement in equities after reassurances from both the ECB and the Fed. Greece’s credit rating outlook was lowered further by S&P from stable to negative as the uncertainty over its ability to meet bailout conditions continued. In the US, unemployment figures continued to worsen and the Fed’s chief Bernanke was forced to address the unemployment problem at Jackson Hole. Overall data releases from China were weak with declining exports, industrial production and manufacturing figures. Earnings revisions for MSCI EM were revised downwards for 2012 and 2013. The salient moment for the fourth quarter was undoubtedly the re-election of President Obama and the last minute knife edge decision for the fiscal cliff. The re-election of President Obama helped to remove some of the policy uncertainty for the US. A strong rally in China in December allowed the Shanghai composite to erase some of its earlier losses of this year. The first quarter of the year was an upbeat period for KBC Equity Fund Fallen Angels, with the fund ending the quarter in positive terms when compared to the broad index of global stocks. The fund also outperformed the broad world market during this period. The Banking and Materials industry groups contributed positively to the performance of the fund during the first quarter with Regions Financial Corp, Royal Bank of Scotland and Siam City Cement all among the top performers over the period. In the Materials group, Siam City Cement was the stalwart name in the first quarter after their share price rose the most in four years. There was widespread speculation as to whether the Bangkok flood-related reconstruction would boost demand and prices for the company. Siam City which is Thailand’s second largest cement maker was set to enjoy a growth in their cement sales as the Government set about rebuilding the damaged infrastructure from the floods which engulfed Bangkok in late 2011. In a similar pattern to 2011, the second quarter was more volatile with the fund performing in negative terms on an absolute basis; it also underperformed the index over the period. The banking sector continued with its strong performance, followed closely by the Food & Beverage, Pharmaceuticals and Materials sectors. The top performing names over the first half of the year were Grupo Modelo, Regions Financial Corp and Sunoco Inc. The technology sector contributed negatively to performance over the period, with names such as Sandisk, Lexmark and Dell providing disappointing returns for the second quarter. Technology manufacturer Sandisk Corp saw its shares plummet during April after releasing their second quarter sales forecast which was lower than analyst’s expected. The first quarter gains for the fund were almost wiped out during the second quarter making it a volatile period for KBC Equity Fund Fallen Angels with the fund slightly underperforming the broad index over the first two quarters. The performance of KBC Equity Fund Fallen Angels improved during the third quarter yet underperformed the index over the period. The majority of sectors found themselves in positive territory over the quarter. Performance of the Information Technology and Utilities groups lagged the most for the fund with all other industry groups in positive territory. The top performing industry group was Financials followed closely by Energy. Top names in the quarter included Central Japan Railway Co, Perisimmon and Siam City Cement. The laggard names came in the form of Dell, H Lundbeck and Lexmark International. Shares in printer maker Lexmark International plummeted the most in a year early on in July after they cut their second quarter outlook due to weaker demand in Europe. A drop off in corporate spending affected the company badly as workers have favoured the use of mobile devices.
The performance of KBC Equity Fund Fallen Angels retained its positive trend throughout the fourth quarter, and the fund managed to slightly outperform the index over this period. Performances were mixed on an industry group level, with Financials once again attaining the best returns while Telecommunications and Utilities were mildly negative. In terms of positive names, Lloyds Banking Group was a stellar performer for the fund, with the restructuring of the bank well on target. As a result of Lloyd’s impressive results, they were upgraded by many analysts throughout the year. On a full year basis the Financials and Industrials sectors were the two strongest in terms of performance. The only negative sector in the fund was Information Technology. In keeping with the positive start to the year, performance of KBC Equity Fund Fallen Angels was impressive over the full year period, with the fund ending the year 2012 in positive territory in absolute , however the fund slightly underperformed the broad world market.
2.1.8 FUTURE POLICY Looking forward, we believe that 2013 will be a year of sluggish and weak growth for the overall global economy. While global growth is expected to be positive it is not anticipated that it will be much more positive when compared to 2012. Developed markets are being highlighted as the point of weakness with only modest expansion expected. The ongoing fiscal crisis in the Eurozone is expected to continue its negative influence on global growth. Despite the European Central Bank’s efforts to control and address the crisis, Europe remains in an unstable condition. Economic releases for the Eurozone countries are not supportive with overall GDP figures expected to continue their decline in 2013. A second cause of concern is the fiscal restructuring as a result of the credit crisis that remains, almost 5 years on, for both the US and Eurozone. Household incomes and corporate and financial sector rebalancing is expected to continue hindering consumption growth in these regions. The fiscal austerity that is being forced upon consumers is making stable domestic growth for many countries virtually impossible. While a political crisis has been averted in the US after a last minute agreement regarding the fiscal cliff, this may only a short term solution in advance of the debt ceiling debate to follow in February. Inflation is expected to remain contained in developed markets this year allowing monetary policy to focus on growth. In the US, growth is predicted to improve in the second half of the year along with improvement in the housing market and unemployment figures. It would appear that growth in 2013 will emanate from the same source as 2012, with almost 90% of global GDP growth expected to originate from Emerging Markets. Growth is also expected to continue in China where considerable confidence remains, however it is not expected to surpass the growth of 2012. In relation to the BRIC countries, Brazil is expected to exhibit the most improved growth as its economy rebounds as a result of the monetary and fiscal policies introduced this year. The key macro issues facing Emerging Markets in 2013 are the EU sovereign debt crisis, US fiscal policy and Chinese growth. In line with the theme, KBC Equity Fund Fallen Angels will continue to invest in a global portfolio of shares that have in the past underperformed the market, but that demonstrate the potential to outperform in the future. We will continue to ensure that the portfolio is diversified, with sector and regional allocation in line with the MSCI World All Countries Index.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 12.048.727,67 12.217.506,57
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 772.900,73 228.067,93 C. Shares and similar instruments a) Shares 12.013.869,32 12.179.970,38 Of which securities lent 321.379,70 246.884,84 D. Other securities 1.495,03
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 217.268,46 243,20 b) Tax assets 525,30 525,30 B. Payables a) Accounts payable (-) -40.200,49 -15.866,95 c) Borrowings (-) -212.855,73 -8.203,99 d) Collateral (-) -772.900,73 -228.067,93
V. Deposits and cash at bank and in hand A. Demand balances at banks 66.245,24 53.554,37
VI. Accruals and deferrals A. Expense to be carried forward 468,36 B. Accrued income 17.997,71 18.896,60 C. Accrued expense (-) -15.617,17 -12.080,70
TOTAL SHAREHOLDERS' EQUITY 12.048.727,67 12.217.506,57
A. Capital 4.060.829,92 5.767.370,65
B. Income equalization -14.824,61 -4.511,57
C. Profit(Loss) carried forward 6.441.927,02 7.299.430,85
IX Financial instruments lent 321.379,70 246.884,84
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 1.543.339,58 -1.106.750,95 D. Other securities 7.341,06 41,68 E. Open-end undertakings for collective investment -7.521,81 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -146.639,74 219.312,95
II. Investment income and expenses A. Dividends 375.851,64 286.459,59 B. Interests a) Securities and money market instruments 4.175,77 6.012,21 b) Cash at bank and in hand and deposits 1.233,70 2.484,18 C. Interest on borrowings (-) -868,37 -1.522,42
III. Other income B. Other 319,24
IV. Operating expenses A. Investment transaction and delivery costs (-) -13.329,71 -19.176,11 B. Financial expenses (-) -177,46 -1.335,31 C. Custodian's fee (-) -10.174,70 -11.609,43 D. Manager's fee (-) a) Financial management -172.823,07 -181.443,82 b) Administration and accounting management -12.249,57 -13.010,98 E. Administrative expenses (-) -35,20 -28,04 F. Formation and organisation expenses (-) -1.159,78 -1.508,07 G. Remuneration, social security charges and
pension -2,70
H. Services and sundry goods (-) -3.032,22 -2.645,73 J. Taxes -9.596,56 -10.364,38 K. Other expenses (-) -1.060,03 -2.493,46
Income and expenditure for the period Subtotal II + III + IV 156.754,44 50.134,77
V. Profit (loss) on ordinary activities before tax 1.560.795,34 -844.783,36
VII. Result for the period 1.560.795,34 -844.783,36
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 7.987.897,75 6.450.135,92 Profit (loss) brought forward from the previous
financial year 6.441.927,02 7.299.430,85
Profit for the period available for appropriation 1.560.795,34 -844.783,36 Income on the creation of shares (income on the
cancellation of shares) -14.824,61 -4.511,57
II. (Appropriations to) Deductions from capital -7.970.389,43
III. Profit (loss) to be carried forward 6.441.927,02
IV. (Dividends to be paid out) -17.508,32 -8.208,90
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND FALLEN ANGELS
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Australia
GPT GROUP - 25.055,00 AUD 3,680 72.606,03 0,60 0,60
MACQUARIE GROUP LTD - 1.980,00 AUD 35,490 55.335,22 0,46 0,46
SUNCORP GROUP LTD - 11.720,00 AUD 10,170 93.859,67 0,78 0,78
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND FALLEN ANGELS (IN
THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 87.535,80 3.108.647,78 3.196.183,58 Sales 569.618,02 4.197.747,72 4.767.365,73 Total 1 657.153,81 7.306.395,50 7.963.549,31 Subscriptions 308.989,18 72.411,31 381.400,49 Redemptions 920.951,39 1.162.565,52 2.083.516,91 Total 2 1.229.940,57 1.234.976,83 2.464.917,40 Monthly average of total assets
12.668.647,74 12.327.372,06 12.498.009,90
Turnover rate -4,52 % 49,25 % 44,00 %
1st half of year 2nd half of year YearPurchases 87.535,80 3.108.647,78 3.196.183,58 Sales 569.618,02 4.197.747,72 4.767.365,73 Total 1 657.153,81 7.306.395,50 7.963.549,31 Subscriptions 308.989,18 72.411,31 381.400,49 Redemptions 920.951,39 1.162.565,52 2.083.516,91 Total 2 1.229.940,57 1.234.976,83 2.464.917,40 Monthly average of total assets
12.717.290,34 12.287.336,41 12.449.074,94
Corrected turnover rate -4,50 % 49,41 % 44,17 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 772.900,73 772.900,73 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
CAP BE0170815956 EUR 12.24% 9.50% -0.37% 0.0464 30/04/1999 0.26%
DIV BE0170814942 EUR 12.22% 9.51% -0.37% 0.0464 30/04/1999 0.25%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. the return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NAV(D) / NAV(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NAV(D) / NAV(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
where C is a factor that is determined for all N dividends between the calculation date D and the reference date. For dividend i on date Di with value Wi:
Ci = [Wi / NAV(Di)] + 1 i = 1 ... N
from which C = C0 * .... * CN. If the interval between the two dates exceeds one year, the ordinary return calculation is
converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares. Dividend on ex-dividend date 28/03/2013: 4.20 EUR net (5.60 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Distribution: 1.697% Capitalization: 1.687% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 80 46 57.14%
CSFBSAS 629 145 23.08%
DEUTSCHE 192 108 56.25%
EQ CSA MACQUARIE 13 7 57.15%
JP MORGAN 29 16 55.56%
MERRILL 3,725 2,128 57.14%
MORGAN STANLEY 230 90 39.19%
NOMURA 477 138 28.89%
UBSWDR 72 39 54.81%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 3.654,03 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
KGHM POLSKA MIEDZ SA PLN 587 190,000 27.333,77
LOBLAW COMPANIES LTD. CAD 5.026 41,930 160.539,48
LONMIN PLC GBP 2.991 2,842 10.480,12
POLISH OIL & GAS PLN 65.073 5,210 83.089,56
POLSKI KONCERN NAFTO PLN 3.292 49,500 39.936,77
Total 321.379,70
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FLEMISH COMMUNITY - 09/14 3.75% 31/03 EUR 550.000 EUR 588.506,05
FRANCE - 04/55 4.00 % 25/04 EUR 134.000 EUR 164.225,44
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 18.000 EUR 20.169,23
Total 772.900,72 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund America
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND AMERICA
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 17 April 1991 Initial subscription price: 500 USD Currency: USD Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 1230.35 USD Currency: USD
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of these assets are invested in shares of American and Canadian companies.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. The debt crisis in Europe continued to rage unabated. Five euro countries have already needed a bailout from the European emergency fund. Greece twice reached an agreement during the year with its private sector creditors on restructuring the bond debt it owes them. Spain found itself in the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. Although more jobs have been created than lost in the US since 2010, the rate of employment growth has remained on the low side. Pay also increased very little. Household purchasing power consequently hardly rose and provided little support for economic growth, which remained extremely lacklustre (+2.1% y-o-y in the first three quarters of 2012). On top of that, the budgetary debate became mired in a total political impasse. The divisions between Republicans and Democrats are considerable and are ideologically driven. Aware of their inability to work out a policy and fearful that the stalemate could lead to an uncontrolled explosion in debt, the parties have passed automatic spending cuts into legislation to reduce the budget deficit to 3% of GDP over a period of ten years. The concrete measures to this end are damaging the priorities of Democrats and Republicans alike. In extremis the retiring Congress decided on New Year's Day to delay automatic spending cuts until 1 March 2013.
As far as the performance of the market was concerned, the initial phase of the economic recovery went hand in hand with a fine stock-market rally, resulting in the S&P 500 being 75% higher at the end of April 2010 than its low point on 9 March 2009. Since then, the equity markets have struggled to find fresh impetus. Of the traditional markets, Western Europe (MSCI Europe return index up +18.4% over this period) managed to claw back some of the underperformance that has built up since the start of the euro crisis in autumn 2009. Nevertheless the problems continued to mount in the EMU: they include the Greek debt restructuring, the threat of an extremist separatist party winning the Greek elections, the undercapitalisation of Spanish banks, the referendum in Ireland, and the financial collapse in Cyprus. Apparently the underperformance of European shares over many years has increased the valuation gap with US shares to such an extent that fresh events in the euro crisis have less impact on the stock markets. Wall Street closed the year substantially higher on balance (S&P500: +13.4%, Dow Jones: +7.3%), while European investors also benefited from a small increase in the value of the dollar (return MSCI USA in euros: +13.9%).
2.1.8 FUTURE POLICY The US and European barometers measuring confidence among business leaders peaked in spring 2011 at record levels, but have slipped over the past 18 months. In the US they have ended up in the twilight zone between recession and expansion. In Europe they are below freezing point. We are consequently expecting US growth to remain positive but modest (around 1.5-2% y-o-y in the coming quarters) as jobs growth remains moderate, pay increases are barely keeping pace with inflation and budgetary policy has now finally (and probably for many years) struck down the path of austerity. The fragile recovery of the housing market and of corporate investment could be sustained. The foundations for more sustainable growth in 2013 and beyond have however been laid in recent years. US households have trimmed back their debt level significantly, the savings rate has already increased considerably and loan servicing (instalments and interest payments combined) now accounts for only 10% of household budgets (the lowest level in fifteen years – it was at 14% three years ago). Households are gradually moving towards a position where they can spend more of their money on consumption. The explosive growth in earnings between 2009 and 2012 bolstered companies’ already substantial cash positions. Investments were scaled back considerably during the crisis, with the foundations being laid for a catch-up process. After much squabbling between the Democrats and Republicans a compromise was after all reached on New Year's Day concerning the most urgent budgetary issues. The agreement creates certainty as to households’ tax position, while the budget deficit is being reduced sharply by a mix of tax increases and spending cuts. The agreement is however insufficient to restore US federal finances to sound health. Further measures are in the offing and a fresh programme of cuts may be expected as early as spring 2013. While that may be regarded as certain, how far the cuts go, what form they take and over what timeframe they will be spread out will need to become clear in the coming months. Lastly, the Fed is continuing to make unprecedented cash injections with its programme for purchasing government bonds and other debt paper. In doing so it wants to avert the risk that the banks will focus unduly on their solvency by insisting on overly strict lending conditions and so undermine economic growth. These cash injections will either find their way into the real economy or generate inflationary expectations. In any case they will keep long rates low and banish any fears of deflation. Our optimism concerning the US market is tempered by the current profit margins which, at least in a historical context, are already at a high level.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 405.778.341,08 152.796.244,19
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 1.932.432,67 876.822,46 C. Shares and similar instruments a) Shares 371.637.868,71 151.992.850,17 F. Derivative financial instruments m) Financial indices Futures and forward contracts (+/-) -452.625,00
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 11.907,50 c) Collateral 1.487.500,00 B. Payables a) Accounts payable (-) -173.319,52 -87.560,37 c) Borrowings (-) -346.447,92 -76.792,41
V. Deposits and cash at bank and in hand A. Demand balances at banks 31.910.528,60 300.125,18
VI. Accruals and deferrals A. Expense to be carried forward 17.992,35 B. Accrued income 232.666,31 229.185,33 C. Accrued expense (-) -462.170,27 -456.378,52
TOTAL SHAREHOLDERS' EQUITY 405.778.341,08 152.796.244,19
A. Capital 213.306.742,78 -10.732.463,04
B. Income equalization 9.375,87 -608.475,70
C. Profit(Loss) carried forward 163.524.993,46 185.431.123,53
D. Result for the period 28.937.228,97 -21.293.940,60
Off-balance-sheet headings
I Collateral (+/-)
I.A Collateral (+/-)
I.A.B Cash at bank and in hand/deposits 1.487.500,00
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 30.177.125,00
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -214.512,86 5.612,38 C. Shares and similar instruments a) Shares 28.420.325,48 -20.854.109,37 F. Derivative financial instruments l) Financial indices Futures and forward contracts -580.574,80 -432.451,35 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 263.832,24 65.512,34
II. Investment income and expenses A. Dividends 5.126.702,98 7.936.823,34 B. Interests a) Securities and money market instruments 271.709,03 248.440,05 b) Cash at bank and in hand and deposits 21.795,47 15.338,61 C. Interest on borrowings (-) -8.817,62 -57.083,47
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
846.687,10 147.179,65
B. Other 1.404.593,94
IV. Operating expenses A. Investment transaction and delivery costs (-) -473.091,02 -1.048.018,67 B. Financial expenses (-) -4.184,48 -27.051,46 C. Custodian's fee (-) -137.832,15 -489.688,40 D. Manager's fee (-) a) Financial management Classic Shares -547.095,47 -6.875.616,66 Institutional B Shares -3.387.707,38 -167.299,84 b) Administration and accounting management -297.765,64 -523.841,80 E. Administrative expenses (-) -7,52 F. Formation and organisation expenses (-) -20.413,94 -63.915,98 G. Remuneration, social security charges and
pension -22,57 -158,00
H. Services and sundry goods (-) -44.531,68 -120.292,04 J. Taxes Classic Shares -34.073,30 -278.697,34 Institutional B Shares -43.017,26 171.703,41 K. Other expenses (-) -220.175,64 -350.919,94
Income and expenditure for the period Subtotal II + III + IV 1.048.158,91 -78.504,60
V. Profit (loss) on ordinary activities before tax 28.937.228,97 -21.293.940,60
VII. Result for the period 28.937.228,97 -21.293.940,60
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 192.471.598,30 163.528.707,23 Profit (loss) brought forward from the previous
financial year 163.524.993,46 185.431.123,53
Profit for the period available for appropriation 28.937.228,97 -21.293.940,60 Income on the creation of shares (income on the
cancellation of shares) 9.375,87 -608.475,70
II. (Appropriations to) Deductions from capital -192.465.751,18
III. Profit (loss) to be carried forward 163.524.993,46
IV. (Dividends to be paid out) -5.847,12 -3.713,77
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND AMERICA
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND AMERICA (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 259.453.343,10 161.669.582,99 421.122.926,09 Sales 147.781.827,27 83.966.583,67 231.748.410,94 Total 1 407.235.170,37 245.636.166,66 652.871.337,04 Subscriptions 203.405.046,31 261.389.282,02 464.794.328,33 Redemptions 90.514.945,54 149.878.711,97 240.393.657,51 Total 2 293.919.991,85 411.267.993,99 705.187.985,84 Monthly average of total assets
265.122.859,07 333.646.010,90 299.384.434,98
Turnover rate 42,74 % -49,64 % -17,47 %
1st half of year 2nd half of year YearPurchases 259.453.343,10 161.669.582,99 421.122.926,09 Sales 147.781.827,27 83.966.583,67 231.748.410,94 Total 1 407.235.170,37 245.636.166,66 652.871.337,04 Subscriptions 203.405.046,31 261.389.282,02 464.794.328,33 Redemptions 90.514.945,54 149.878.711,97 240.393.657,51 Total 2 293.919.991,85 411.267.993,99 705.187.985,84 Monthly average of total assets
266.843.703,10 383.424.758,85 -3.243.437.619,59
Corrected turnover rate 42,46 % -43,20 % 1,61 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBCCLEAR DEKKING USD
USD 1.487.500,00 1.487.500,00 N/A 31.12.2012
STPOORS 13/03/2013
USD 30.177.125,00 30.177.125,00 250,00 20.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 253.184.761,23 146.726.451,38
2012 - 12 443.858.267,42 220.848.396,63
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 116.129.007,85 1.342,42
2012 - 12 363.084.079,29 1.525,10
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0126162628 EUR 11.85% 13.36% 2.04% 3.05% 17/04/1991 4.62%
CAP BE0126162628 USD 13.59% 10.21% -0.05% 5.43% 17/04/1991 5.27%
DIV BE0152249562 EUR 11.89% 13.37% 2.04% 3.04% 17/04/1991 4.72%
DIV BE0152249562 USD 13.63% 10.22% -0.04% 5.42% 17/04/1991 5.26%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228535686 EUR 11.87% 25/11/2011 22.26%
CAP BE6228535686 USD 13.61% 25/11/2011 21.58%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in USD and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in USD and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 1.67 USD net (2.23 USD gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.583% Classic Shares Capitalization: 1.611% Institutional B Shares Capitalization: 1.596% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 625 391 62.50%
CSFBSAS 32,208 20,094 62.39%
EQ CSA MACQUARIE 3,594 2,247 62.50%
JP MORGAN 52,518 43,222 82.30%
MORGAN STANLEY 748 415 55.56%
NOMURA 91,058 55,983 61.48%
UBSWDR 116,857 70,091 59.98%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The S&P 500 is an equity index computed by Standard & Poor’s that is made up of 500 shares. The dividend is not reinvested. The S&P 500 serves primarily as a continuous indicator of market trends on the US stock markets. The value of the S&P 500 index is calculated on the basis of the market value of the shares of 500 companies at a given point in time, compared to the market value of the shares of 500 similar companies during the reference period from 1941 to 1943. The index is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Standard & Poor’s has all proprietary rights with repect to the index. In no way Standard & Poor’s endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Standard & Poor’s disclaims any liability for the issue and offering of the shares of this undertaking for collective investment The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to -14.441,20 USD. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Buyback America
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND BUYBACK AMERICA
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 26 June 1998 Initial subscription price: 500 USD Currency: USD Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 827.56 USD Currency: USD
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED: At least 75% of the assets are invested in the shares of US companies that pursue a policy of buying back their own shares. More particularly, companies are selected whose share buyback policy can be considered to be an important indicator for achieving a capital gain on the investment in the short or medium term.
RISK CONCENTRATION: Shares in US companies that pursue a policy of buying back their own shares.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR KBC Equity Fund Buyback America invests in US stocks that buy back their own shares. Research has shown that companies that buy back their own shares, for valuation reasons, tend to outperform their peers over a 3-4 year period. The fund therefore adopts a buy and hold strategy for that period. The fund aims at sector neutrality, in order to avoid unintended sector bets and is measured against the MSCI USA Index.
Equity markets moved considerably higher at the start of 2012. The Fed’s announcement that rates will remain low until at least late 2014, record results from Apple and positive US GDP growth numbers were the key support factors for equity markets. It was not all good news however, as major French banks were downgraded and concerns about the Greek ‘private’ debt restructuring continued to prevail. Into February and after a short pause, markets climbed higher again in the second half of the month. Regionally, the euro area markets strongly outperformed with investors becoming convinced that after two years of crisis, the region has succeeded in isolating the Greek question. The risks of severe damage to the European economy as a whole and for the financial sector in particular fell sharply. Towards the end of the first quarter, positive macroeconomic developments, especially in the US, the successful Greek debt restructuring and the liquidity injection by central banks drove equity markets modestly higher in March. Towards the end of the month, investors’ optimism was tempered by worries over the risks for a hard landing in China and the rise in government bond yields throughout the world. The beginning of the second quarter saw a global pullback on equity markets, prompted by a slowdown in Chinese growth to its lowest level since Q2 2009, poor EU and US economic data and confirmation that the UK and Spain had slide back into recession. The European debt crisis flared up again as yields surged on Spanish bonds, the Dutch government resigned and Presidential Election in France lead to much political uncertainty. Euro area concerns escalated in May as Greek exit fears rose after elections in the country produced a stalemate and the country was unable to form a government. Statements from various European officials alluding to the fact that an exit scenario had been discussed sent markets into a tailspin. Sentiment was further hit when periphery yields spiked after Spain partially nationalized Bankia, Spain’s second largest mortgage lender. As the end of the second quarter approached, Equity markets surged on the final trading day of the June after unexpected policy responses from the EU Summit, involving an agreement to use the ESM to recapitalise banks directly and take steps towards banking union soothed market nerves and increased appetite for risk assets. Victory for the pro-EU/Bailout New Democrats in Greece also supported markets. Into the second half of the year main market developments for the quarter saw Central Banks around the world implementing a new round of monetary easing in July to avoid a slide into a fresh recession. The ECB cut each of its key rates by 25 bps, bringing the main refi rate to 0.75% - a record low and the deposit rate to 0%. Later in the month, Draghi’s comments that the “Euro is irreversible” and that the ECB will do whatever it takes to preserve the currency sparked a month-end rally in stocks globally. In the UK, the Bank of England implemented an additional GBP 50 billion of QE while in China, the PBOC cut deposit and lending rates to 3% and 6% respectively. The equity rally ran out of steam in August amid holiday season in Europe and the U.S, with little news or market developments to influence sentiment. In the US, unemployment figures continued to worsen. The Fed’s chief Bernanke hinted that the Fed was willing to provide additional policy stimulus in the near term in order to ‘promote a stronger economic recovery and sustained improvement in labour market conditions’. Overall data releases from China were weak with declining exports, industrial production and manufacturing figures. Global markets had a positive month towards quarter-end buoyed by the ECB decision to allow unlimited purchasing of short-dated bonds (under the Outright Monetary Transactions operation), of countries who have entered fiscal adjustment programmes. Following this, the German court’s decision to back the EU bailout and the announcement from the Fed that it was introducing QE3 boosted investor confidence and lead markets to rally. Into the final quarter of the year and main market developments saw consumer spending, confidence and housing indicators in the U.S remain largely positive, while in Europe the ECB left its main interest rate unchanged at 0.75%. Towards quarter-end the FOMC expanded QE in the US, by adding at additional $45 billion per month of open-ended Treasury security purchases, while the fiscal cliff has been averted by a last minute deal, but with no agreement on the debt ceiling it is likely that this issue will return in the near future. The EU approved the disbursement of the next tranche of Greek aid. The region’s stock markets were buoyed towards the end of the quarter as perceptions grew that the debt crisis had stabilized somewhat. In terms of the Buyback America fund performance, the first quarter of the year begun as quite a good one, continuing the rally that began in early January and sustaining this to quarter-end. The fund ending the quarter in positive territory on an absolute basis but disappointed in relative terms when compared to the broad index of US stocks. The main reason for the underperformance was attributed to the Technology Hardware & Equipment sector and in particular the absence of Apple Inc from the portfolio, which rose almost 50% in the quarter. On the positive side, Pharmaceuticals was the main driver of performance largely driven by stock selection particularly the exclusion of Johnson & Johnson, Merck and Bristol-Myers from the fund. The second quarter was more volatile with the fund declining on an absolute basis but broadly in line with the index. Consumer Staples was the stand out performer in the fund in the second quarter with names such as Kimberly-Clark, Pepsico and Wal-Mart for which the fund has overweight positions all outperforming the index. At the other end of the spectrum, the Real Estate sector was the biggest detractor to performance as the main sector weighting, Forestar Group underperformed the index after disappointing Q1 earnings. In further news, Apple announced a buyback in Quarter 2 for the purpose of cancelling shares and increasing shareholder value and on that basis the stock was added to the fund.
Into the second half of the year and the fund outperformed the index in the third quarter where stock allocation and selection were key contributors to positive performance. On a Sector level, the best performing sector was Real Estate (2% of the fund), driven by the significant outperformance of Forestar Group following publication of its Quarter 2 results which surprised on the upside. This was followed by Materials (4% of the fund), with the fund’s off-benchmark position in Coeur D’Alene Mines and the fund’s overweight position in Eastman Chemical contributing to the positive performance of the sector. The Software & Services sector (10% of the fund), followed by the Technology Hardware and Equipment sector (7% of the fund) were the main underperformers for the fund in the quarter. Performance in both sectors was negatively affected by the exclusion of Google and the underweight in Apple Inc respectively. Into the final quarter of the year and the fund once again outperformed the index, with Stock selection being the main driver of positive performance. During the fourth quarter, stock selection was the key contributor to positive performance. On a Sector level, the best performing sector was Software and Services (9% of the fund), driven by the significant outperformance of the fund’s overweight position in Visa Inc. The stock rose from USD134.28 to USD151.28 in the period. This was followed by Technology Hardware & Equipment sector (6.5% of the fund), with the fund’s underweight in Apple, which suffered a large decline in the period, falling from USD667.11 to USD532.17 one of the more notable positive attributors to performance. In terms of the main underperformers for the fund in the quarter, the Energy sector (12% of the fund), was the biggest detractor after the fund’s largest positions, in Chevron and Exxon both underperformed the index on the back of speculation that oil prices could decline in the coming quarters. This was followed by the Real Estate sector (2% of the fund) after Annaly Capital Management declined from USD16.84 a share to USD14.04 after it announced a reduction of its quarterly dividend from USD0.50 to USD0.45 a share. The cut further demonstrated the difficult environment that the company is in as the dividend also reflected the one-off sale proceeds of MBS in the quarter.
2.1.8 FUTURE POLICY With buyback activity picking up in the U.S I would certainly expect this trend to continue in the coming quarters. The reasons behind the environment is moving towards one that is more conducive to buybacks, continue to be valid. Ultra low interest rates available on fixed income assets is fueling demand for stocks that are returning cash to the investor. High EPS yields and low bond yields, present an opportunity for companies to shift their capital structure as debt capital is significantly cheaper. In addition, low interest rates are incentivising corporates to borrow money in the credit markets to buy back their own shares rather that finance large-scale capex or M&A. In the U.S, proposals relating to Corporate tax reform will be a further catalyst to higher dividends and increased share repurchases.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 227.191.670,82 97.015.566,52
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 580.673,99 447.583,01 C. Shares and similar instruments a) Shares 224.316.322,19 96.136.490,23 D. Other securities 10.622,40 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) 2.230,25 m) Financial indices Futures and forward contracts (+/-) 4.260,00 13.362,50
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 581.277,69 185.830,60 c) Collateral 28.000,00 648.000,00 B. Payables a) Accounts payable (-) -77.961,07 -197.862,37
V. Deposits and cash at bank and in hand A. Demand balances at banks 1.880.732,51 -131.693,59
VI. Accruals and deferrals A. Expense to be carried forward 4.894,18 B. Accrued income 172.407,21 85.720,44 C. Accrued expense (-) -294.041,70 -189.611,13
TOTAL SHAREHOLDERS' EQUITY 227.191.670,82 97.015.566,52
A. Capital 196.296.514,29 77.396.689,28
B. Income equalization 339.121,28 34.394,70
C. Profit(Loss) carried forward 19.618.877,24 26.427.266,68
D. Result for the period 10.937.158,01 -6.842.784,14
Off-balance-sheet headings
I Collateral (+/-)
I.A Collateral (+/-)
I.A.B Cash at bank and in hand/deposits 28.000,00 648.000,00
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 568.000,00 10.596.025,00
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -107.090,49 506,82 C. Shares and similar instruments a) Shares 10.191.984,35 3.303.375,53 D. Other securities 8.153,95 75.051,20 F. Derivative financial instruments l) Financial indices Futures and forward contracts 233.690,00 13.362,50 H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -2.230,25 2.230,25 b) Other foreign exchange positions and
transactions 31.200,31 -9.955.845,93
II. Investment income and expenses A. Dividends 2.372.106,12 2.311.219,63 B. Interests a) Securities and money market instruments 144.596,73 17.217,98 b) Cash at bank and in hand and deposits 787,72 283,45 C. Interest on borrowings (-) -1.235,16 -1.551,74
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
500.621,65 16.431,55
B. Other 3.858,48
IV. Operating expenses A. Investment transaction and delivery costs (-) -402.114,70 -309.675,55 B. Financial expenses (-) -1.669,30 -3.946,15 C. Custodian's fee (-) -80.562,84 -119.969,37 D. Manager's fee (-) a) Financial management Classic Shares -657.848,16 -1.806.629,65 Institutional B Shares -948.704,21 -83.082,39 b) Administration and accounting management -115.139,20 -130.627,58 E. Administrative expenses (-) 18,88 F. Formation and organisation expenses (-) -8.765,11 -14.990,31 G. Remuneration, social security charges and
pension -10,30 -31,81
H. Services and sundry goods (-) -20.433,10 -30.152,25 J. Taxes Classic Shares -54.111,08 -82.556,90 Institutional B Shares -16.823,12 22.709,23 K. Other expenses (-) -129.245,80 -69.990,01
Income and expenditure for the period Subtotal II + III + IV 581.450,14 -281.464,51
V. Profit (loss) on ordinary activities before tax 10.937.158,01 -6.842.784,14
VII. Result for the period 10.937.158,01 -6.842.784,14
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 30.895.156,53 19.618.877,24 Profit (loss) brought forward from the previous
financial year 19.618.877,24 26.427.266,68
Profit for the period available for appropriation 10.937.158,01 -6.842.784,14 Income on the creation of shares (income on the
cancellation of shares) 339.121,28 34.394,70
II. (Appropriations to) Deductions from capital -30.811.292,61
III. Profit (loss) to be carried forward 19.618.877,24
IV. (Dividends to be paid out) -83.863,92
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND BUYBACK AMERICA
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND BUYBACK AMERICA
(IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 99.645.187,68 199.521.268,18 299.166.455,86 Sales 138.059.893,27 43.097.419,20 181.157.312,47 Total 1 237.705.080,96 242.618.687,38 480.323.768,34 Subscriptions 92.603.360,56 184.778.797,00 277.382.157,56 Redemptions 130.985.156,08 27.231.157,72 158.216.313,80 Total 2 223.588.516,64 212.009.954,72 435.598.471,36 Monthly average of total assets
137.048.652,30 92.841.738,37 114.945.195,33
Turnover rate 10,30 % 32,97 % 38,91 %
1st half of year 2nd half of year YearPurchases 99.645.187,68 199.521.268,18 299.166.455,86 Sales 138.059.893,27 43.097.419,20 181.157.312,47 Total 1 237.705.080,96 242.618.687,38 480.323.768,34 Subscriptions 92.603.360,56 184.778.797,00 277.382.157,56 Redemptions 130.985.156,08 27.231.157,72 158.216.313,80 Total 2 223.588.516,64 212.009.954,72 435.598.471,36 Monthly average of total assets
123.073.795,28 85.909.603,58 103.614.727,16
Corrected turnover rate 11,47 % 35,63 % 43,16 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBCCLEAR DEKKING USD
USD 28.000,00 28.000,00 N/A 28.12.2012
STPOORS EMINI MAR 13
USD 568.000,00 568.000,00 50,00 17.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 48.881.514,01 1.334.356,51
2012 - 12 245.163.630,89 138.649.677,69
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 49.529.401,92 904,58
2012 - 12 160.976.298,71 1.025,24
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0168099951 EUR 11.62% 11.85% 3.40% 0.05 26/06/1998 3.78%
CAP BE0168099951 USD 13.35% 8.74% 1.28% 0.0742 26/06/1998 5.07%
DIV BE0168098946 EUR 11.53% 11.84% 3.40% 0.0499 26/06/1998 -3.81%
DIV BE0168098946 USD 13.26% 8.74% 1.28% 0.0742 26/06/1998 -2.62%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228536692 EUR 11.60% 25/11/2011 22.20%
CAP BE6228536692 USD 13.34% 25/11/2011 21.43%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in USD and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in USD and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 2.06 USD net (2.74 USD gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.973% Classic Shares Capitalization: 1.703% Institutional B Shares Capitalization: 1.776% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 62,898 37,665 59.88%
CSFBSAS 20,946 12,729 60.77%
EQ CSA MACQUARIE 22,591 13,386 59.25%
JP MORGAN 38,466 24,017 62.44%
MERRILL 20,792 12,995 62.50%
MORGAN STANLEY 29,637 17,664 59.60%
NOMURA 71,161 41,376 58.14%
UBSWDR 1,281 798 62.30%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The S&P 500 is an equity index computed by Standard & Poor’s that is made up of 500 shares. The dividend is not reinvested. The S&P 500 serves primarily as a continuous indicator of market trends on the US stock markets. The value of the S&P 500 index is calculated on the basis of the market value of the shares of 500 companies at a given point in time, compared to the market value of the shares of 500 similar companies during the reference period from 1941 to 1943. The index is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Standard & Poor’s has all proprietary rights with repect to the index. In no way Standard & Poor’s endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Standard & Poor’s disclaims any liability for the issue and offering of the shares of this undertaking for collective investment The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to -211,39 USD. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Commodities & Materials
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND COMMODITIES & MATERIALS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 25 June 1999 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 414.27 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED The assets are primarily invested in shares of industrial groups in the Materials sector. The Materials sector includes steel, iron, paper, non-ferrous metals, chemicals and construction materials. The sub-fund focuses on what are known as 'highly cyclical materials', which are therefore more sensitive to market fluctuations. The regional allocation may change from time to time. In principle, the sub-fund invests worldwide.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in 2012. The debt crisis in Europe continued to rage unabated. Five euro countries have already needed a bailout from the European emergency fund. Greece twice reached an agreement during the year with its private sector creditors on restructuring the bond debt it owes them. Spain found itself in the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Although more jobs have been created than lost in the US since 2010, the rate of employment growth has remained on the low side. Pay also increased very little. Household purchasing power consequently rose to only a limited extent and provided little support for economic growth, which remained extremely lacklustre. On top of that, the budgetary debate became mired in a total political impasse. The divisions between Republicans and Democrats are considerable and are ideologically driven. Aware of their inability to work out a policy and fearful that the stalemate could lead to an uncontrolled explosion in debt, the parties have passed automatic spending cuts into legislation to reduce the budget deficit to 3% of GDP over a period of ten years. The concrete measures to this end are damaging the priorities of Democrats and Republicans alike. In extremis the retiring Congress decided on New Year's Day to delay automatic spending cuts until 1 March 2013.
Growth in Asia was once again much higher in 2012 than in the industrialised Western world, but the weak growth in those economies nevertheless weighed on exports. The slowdown in the Chinese construction industry also hit the industrial companies. Many Chinese companies proved inadequately equipped to deal with the lower pace of growth and saw a sharp decline in their margins. In the final quarter, however, there were some signs of an upturn in certain segments. Materials did less well than broad market in 2012. Mining companies suffered badly during the first half of the year on fears of a hard landing for the Chinese economy, while paper manufacturers had to contend with higher energy costs. The growing optimism concerning the global economy during the second half provided the markets with a boost but even so the sector was unable to make good the ground it had lost on the market. Within the sector the European stocks performed very poorly. The US performed in line while the Asian names lagged behind. In the fund we had a slight preference for European shares in relation to Asia and the US. We also held a proportion in cash on account of the marked uncertainty. In terms of the various industry groups, miners and steel manufacturers clearly suffered most from the weakness of the economy. Chemicals, by contrast, performed strongly, as did cement stocks. Within the fund we were slightly underweight during the first half in chemicas, which worked out to our disadvantage. During the second half we expanded that underweight position, which did prove effective, since chemicals did somewhat less well than the sector in general during that period. Within chemicals we focused in particular on fertiliser manufacturers, as global stocks of numerous crops were at historically low levels. Their high prices will stimulate increased production, with use of fertiliser one means of achieving this. We also sought out niche players like Arkema and Lanxess. On average we adopted a neutral position towards miners and steel manufacturers during the year. We had a position in several goldmining stocks in order to benefit from the high price of gold. Our slightly overweight position in cement allowed us to benefit from the strong performance in this field.
2.1.8 FUTURE POLICY Now that the fears of a hard landing for the Chinese economy have receded again to some extent and the mining shares have responded positively to this in recent months, we will be taking profits on a number of these stocks and gradually reducing our overweight position in chemicals. More specifically, we will be selling a number of goldmining shares. The price of gold has been in the doldrums since the autumn and a number of goldmining shares are contending with operational problems. The Chinese economy must gradually switch from an investment-oriented towards a more consumer-driven model, which will play to the advantage of the chemical companies, in contrast to the miners and steel manufacturers. Chemical players supplying specialist components for a wide range of consumer products and fertiliser manufacturers will be able to benefit from this switch and accordingly enjoy our preference. In addition we will also be systematically building up our position in US chemical companies that are benefiting from the low energy costs in the US and will overweight these in the portfolio. The extraction of shale gas, and fracking as a technology, have taken off enormously in the US, as reflected by the fact that the price of gas in the US is now four times lower than in Europe. Much of the new investment by the chemical industry in catalytic crackers and plants is accordingly located in the US. This won't do the American chemical companies any harm. In mining our focus will be on companies excavating raw materials that are concerned with the creation of shareholder value and where the supply and demand situation offers interesting prospects. In regional terms we do not have any particular preferences. Growth in Europe is likely to remain low for some time yet, which may explain the low valuation of certain European shares. We will try to take advantage of this by selecting European names that are moderately priced but generate a high proportion of their turnover in regions where the growth prospects are much better. In addition the US chemical sector also remains structurally interesting in view of the lower energy costs vis-à-vis Asian and European counterparts.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 98.679.069,61 51.079.514,95
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 2.143.523,34 1.181.185,19 C. Shares and similar instruments a) Shares 95.141.293,72 50.104.676,21 Of which securities lent 1.775.926,96 1.429.096,47 D. Other securities 13.040,92
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 19.452,67 10.843,34 b) Tax assets 20.701,83 6.796,94 B. Payables a) Accounts payable (-) -50.288,91 -111.523,59 c) Borrowings (-) -100,82 d) Collateral (-) -2.143.523,34 -1.181.185,19
V. Deposits and cash at bank and in hand A. Demand balances at banks 3.619.169,81 1.111.282,91
VI. Accruals and deferrals A. Expense to be carried forward 7.742,52 B. Accrued income 64.647,78 66.037,32 C. Accrued expense (-) -148.948,21 -116.239,88
TOTAL SHAREHOLDERS' EQUITY 98.679.069,61 51.079.514,95
A. Capital 19.074.381,23 -29.347.183,82
B. Income equalization 97.515,83 -381.468,08
C. Profit(Loss) carried forward 80.400.104,95 91.246.111,18
D. Result for the period -892.932,40 -10.437.944,33
IX Financial instruments lent 1.775.926,96 1.429.096,47
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares -1.091.196,66 -7.524.743,82 D. Other securities -45.601,83 -97,63 F. Derivative financial instruments m) Derivative financial instruments Swap contracts (+/-) 514.800,00 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -489.256,08 -3.401.389,47
II. Investment income and expenses A. Dividends 1.929.123,84 2.332.023,78 B. Interests a) Securities and money market instruments 81.211,81 191.906,07 b) Cash at bank and in hand and deposits 13.306,07 41.995,26 C. Interest on borrowings (-) -3.035,94 -16.043,10
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
403.114,13 6.806,52
B. Other 132.941,44
IV. Operating expenses A. Investment transaction and delivery costs (-) -306.752,40 -568.380,06 B. Financial expenses (-) -1.144,39 -63.906,94 C. Custodian's fee (-) -47.823,42 -189.799,57 D. Manager's fee (-) a) Financial management Classic Shares -363.072,43 -1.581.746,11 Institutional B Shares -765.155,04 -28.740,56 b) Administration and accounting management -82.524,37 -94.468,83 E. Administrative expenses (-) -26,36 -27,87 F. Formation and organisation expenses (-) -11.600,73 -22.221,67 G. Remuneration, social security charges and
pension -6,16 -25,56
H. Services and sundry goods (-) -13.554,26 -31.407,01 J. Taxes Classic Shares -20.031,99 -35.760,09 Institutional B Shares -8.855,38 14.896,74 K. Other expenses (-) -70.050,81 -114.555,85
Income and expenditure for the period Subtotal II + III + IV 733.122,17 -26.513,41
V. Profit (loss) on ordinary activities before tax -892.932,40 -10.437.944,33
VII. Result for the period -892.932,40 -10.437.944,33
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 79.604.688,38 80.426.698,77 Profit (loss) brought forward from the previous
financial year 80.400.104,95 91.246.111,18
Profit for the period available for appropriation -892.932,40 -10.437.944,33 Income on the creation of shares (income on the
cancellation of shares) 97.515,83 -381.468,08
II. (Appropriations to) Deductions from capital -79.556.519,50
III. Profit (loss) to be carried forward 80.400.104,95
IV. (Dividends to be paid out) -48.168,88 -26.593,82
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND COMMODITIES & MATERIALS
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND COMMODITIES &
MATERIALS (IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 50.273.247,26 81.863.408,59 132.136.655,85 Sales 29.984.128,59 55.670.603,16 85.654.731,75 Total 1 80.257.375,85 137.534.011,75 217.791.387,60 Subscriptions 54.464.586,04 84.712.475,71 139.177.061,75 Redemptions 34.339.828,47 56.268.075,60 90.607.904,07 Total 2 88.804.414,51 140.980.551,31 229.784.965,82 Monthly average of total assets
80.777.842,31 80.971.388,92 80.874.615,62
Turnover rate -10,58 % -4,26 % -14,83 %
1st half of year 2nd half of year YearPurchases 50.273.247,26 81.863.408,59 132.136.655,85 Sales 29.984.128,59 55.670.603,16 85.654.731,75 Total 1 80.257.375,85 137.534.011,75 217.791.387,60 Subscriptions 54.464.586,04 84.712.475,71 139.177.061,75 Redemptions 34.339.828,47 56.268.075,60 90.607.904,07 Total 2 88.804.414,51 140.980.551,31 229.784.965,82 Monthly average of total assets
95.754.410,30 -170.283.575,15 246.224.147,49
Corrected turnover rate -8,93 % 2,02 % -4,87 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 2.143.523,34 2.143.523,34 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 26.208.008,54 1.164.280,73
2012 - 12 131.784.632,99 80.720.014,06
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 25.246.794,01 443,47
2012 - 12 73.795.089,66 477,53
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0171291868 EUR 6.59% 4.00% -3.23% 0.0398 25/06/1999 -0.42%
DIV BE0171290852 EUR 6.64% 3.92% -3.28% 0.0395 25/06/1999 -0.44%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228540736 EUR 6.68% 24/11/2011 12.79%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 2.21 EUR net (2.95 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.727% Classic Shares Capitalization: 1.776% Institutional B Shares Capitalization: 1.723% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 43,593 24,913 57.15%
CSFBSAS 18,777 10,885 57.97%
DEUTSCHE 15,943 8,834 55.41%
EQ CSA MACQUARIE 4,820 2,992 62.07%
HSBC 3,954 2,046 51.75%
JP MORGAN 3,241 1,801 55.56%
MERRILL 6,332 3,942 62.25%
MORGAN STANLEY 9,036 4,707 52.09%
NOMURA 25,784 13,947 54.09%
SOCGEN 889 413 46.44%
UBSWDR 20,603 11,784 57.20%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 90.661,68 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ALUMINUM CORP OF CHINA LTD -H- HKD 523.999 3,550 182.038,46
ANGANG STEEL COMPANY LTD 'H' HKD 249.999 5,680 138.960,37
ANGLO AMERICAN PLATINUM LTD ZAR 4.200 446,330 167.586,23
BORAL LTD AUD 93.506 4,370 321.774,33
ERAMET EUR 152 110,950 16.864,40
GOLD FIELDS LTD ZAR 5.000 103,750 46.375,76
INCITEC PIVOT LTD AUD 84 3,230 213,65
KGHM POLSKA MIEDZ SA PLN 7.188 190,000 334.710,68
LONMIN PLC GBP 10.110 2,842 35.424,26
NIPPON PAPER GROUP INC JPY 13.799 1193,000 144.405,32
ZIJIN MINING GROUP CO -H- HKD 1.119.999 3,050 334.288,80
Total 1.775.926,96
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FLEMISH COMMUNITY - 09/14 3.75% 31/03 EUR 550.000 EUR 588.506,05
FRANCE 2003 2,25% 25/07/2020 EUR 764.000 EUR 1.111.660,49
FRANCE 2004 1,60% 25/07/2015 EUR 147.000 EUR 188.895,29
FRANCE - 04/55 4.00 % 25/04 EUR 1.000 EUR 1.225,56
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 226.000 EUR 253.235,94
Total 2.143.523,33 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Consumer Durables
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND CONSUMER DURABLES
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 1 October 1999 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 268.07 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED The sub-fund will invest at least 75% of its assets in shares from sectors associated with consumption, including wholesale and retail trade and manufacturers of consumer goods. The manager is responsible for the stock picking. The selection is not restricted to shares from a particular stock-market index. The sub-fund invests worldwide.
RISK CONCENTRATION Shares in consumption-sensitive sectors.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. In Europe the debt crisis continued to rage unabated. Five euro countries needed a bail-out from the European emergency funds. Greece twice reached an agreement during the year with its private sector creditors concerning a rescheduling of its bond debts in their hands. Spain came into the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. Although more jobs have in fact been created than lost in the US since 2010, the rate of employment growth has remained on the low side. And wages increased very little: Household purchasing power consequently rose to only a limited extent and provided little support for economic growth, which remained extremely lacklustre (+2.1% y-o-y in the first three quarters of 2012).
In the EMU real GDP shrank by 0.3% y-o-y. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany fulfilled its traditional role as locomotive of the European economy to a lesser extent than in the recent past. Greater divergence within Europe resulted in a further decline in unemployment in Germany and an alarmingly rapid rise in unemployment in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery. The weak growth in the Old World was also not without its consequences for the export performance of the growth countries. Over the past few years, however, domestic demand (due to a rapidly growing middle class with a high consumption ratio) and inter-regional trade within Asia have played an increasingly important role. The region is better armed to deal with financial crises than it was in the past. Public finances are healthy, the balance of payments is generally neutral (China actually has an astronomical surplus) and the domestic savings buffer is high. Asia’s economic development no longer depends on fickle foreign capital. Thanks to the contribution by the New World the growth of world GDP held up in 2012 (estimated at 2-2.5%).
2.1.8 FUTURE POLICY The US and European barometers measuring confidence among business leaders peaked in spring 2011 at record levels, but have slipped over the past 18 months. In the US they have ended up in the twilight zone between recession and expansion. In Europe they are below freezing point. We are expecting US growth to remain positive but modest (around 1.5-2% y-o-y in the coming quarters) as jobs growth remains moderate, pay increases are barely keeping pace with inflation and budgetary policy has now finally (and probably for many years) struck down the path of austerity. The fragile recovery of the housing market and of corporate investment could be sustained. In Europe the budgetary plans, the banks' tighter lending policy and the high level of uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could still see a further contraction in European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified. Economic growth in Europe will remain below par. There is a greater need for budgetary reform in Europe than in the US, while monetary policy is less aggressive and banks' lending policy more restrictive. The euro crisis has led the European banks to adopt a tough stance on lending. In contrast, real wage rises (however limited) will be somewhat higher in Europe than in the US. Today's world is one of two-speed economies. The mature industrialised economies (US, Europe, Japan) still find themselves in a low-growth environment, with no underlying inflationary pressure, persistently low interest rates and runaway public finances. The picture in the ‘new world’ is altogether different. The strong economic growth has already created inflationary pressure in Asia. As a result, monetary policy in the region will need to be more cautious, or even restrictive (as in 2011) rather than accommodating (as at present). Monetary policy in China and elsewhere in Asia is therefore primed for adjustment and geared to preventing asset-price inflation. This implies not only adjusting interest rates but also active intervention on the credit and foreign exchange markets. This cautious policy is beginning to bear fruit. In China, the rate of increase in the money supply has already slowed considerably, to match the rate of nominal GDP growth. Inflation has fallen from 6.5% in September 2011 to 2.1% in November 2012. The risk of overheating therefore appears under control. In a year in which there will be a change in leadership of the Chinese Communist Party, little will be left to chance and economic growth will be barely lower than in previous years. One of the major challenges for this decade will be the further development of consumption in China and the rest of Asia. That could help bring about a more balanced economic world order: it will not only reduce the region’s dependence on exports but, at least as importantly, will have an effect on international capital flows. More consumption in China will mean lower savings and higher imports, including from the US. That will help the West to ‘grow out’ of its debt problems.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 35.028.703,05 16.324.731,38
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 348.250,04 313.783,75 C. Shares and similar instruments a) Shares 35.159.863,23 16.311.742,91 Of which securities lent 324.226,62 333.515,32 D. Other securities 1.194,01
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 25.009,85 b) Tax assets 1.648,00 B. Payables a) Accounts payable (-) -40.329,39 -7.501,91 c) Borrowings (-) -96.887,58 -11.128,25 d) Collateral (-) -348.250,04 -313.783,75
V. Deposits and cash at bank and in hand A. Demand balances at banks 55.656,97 71.774,48
VI. Accruals and deferrals A. Expense to be carried forward 2.217,49 B. Accrued income 22.415,89 23.613,31 C. Accrued expense (-) -97.025,92 -68.828,66
TOTAL SHAREHOLDERS' EQUITY 35.028.703,05 16.324.731,38
A. Capital 20.839.932,31 6.219.851,88
B. Income equalization -175.217,47 18.714,44
C. Profit(Loss) carried forward 10.104.879,50 11.000.096,94
IX Financial instruments lent 324.226,62 333.515,32
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 2.570.451,92 46.465,08 D. Other securities 12.840,61 -165,54 G. Receivables, deposits, cash at bank and in hand
and payables -0,01
H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 1.188.658,17 -797.996,46
II. Investment income and expenses A. Dividends 1.085.772,75 538.529,69 B. Interests a) Securities and money market instruments 21.593,32 57.751,23 b) Cash at bank and in hand and deposits 443,44 3.637,27 C. Interest on borrowings (-) -1.064,66 -3.210,70
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
346.736,45 2.400,90
B. Other 4.528,29
IV. Operating expenses A. Investment transaction and delivery costs (-) -213.371,65 -173.811,17 B. Financial expenses (-) -454,88 -3.286,67 C. Custodian's fee (-) -15.240,20 -56.898,67 D. Manager's fee (-) a) Financial management Classic Shares -100.454,74 -432.981,31 Institutional B Shares -536.487,63 -11.754,57 b) Administration and accounting management -46.658,36 -28.795,24 F. Formation and organisation expenses (-) -4.744,84 -33.208,79 G. Remuneration, social security charges and
pension -6,19 -6,54
H. Services and sundry goods (-) -7.288,57 21.467,20 J. Taxes Classic Shares -4.447,68 -13.214,12 Institutional B Shares -3.779,44 6.062,00 K. Other expenses (-) -33.389,10 -39.443,76
Income and expenditure for the period Subtotal II + III + IV 487.158,02 -162.234,96
V. Profit (loss) on ordinary activities before tax 4.259.108,71 -913.931,88
VII. Result for the period 4.259.108,71 -913.931,88
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 14.188.770,74 10.104.879,50 Profit (loss) brought forward from the previous
financial year 10.104.879,50 11.000.096,94
Profit for the period available for appropriation 4.259.108,71 -913.931,88 Income on the creation of shares (income on the
cancellation of shares) -175.217,47 18.714,44
II. (Appropriations to) Deductions from capital -14.185.263,05
III. Profit (loss) to be carried forward 10.104.879,50
IV. (Dividends to be paid out) -3.507,69
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND CONSUMER DURABLES
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND CONSUMER
DURABLES (IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 78.248.937,88 28.844.492,15 107.093.430,02 Sales 48.361.866,23 43.999.837,37 92.361.703,60 Total 1 126.610.804,11 72.844.329,52 199.455.133,62 Subscriptions 80.809.536,06 32.343.082,54 113.152.618,60 Redemptions 51.100.595,80 47.263.803,79 98.364.399,59 Total 2 131.910.131,86 79.606.886,33 211.517.018,19 Monthly average of total assets
48.752.375,52 43.428.460,82 46.090.418,17
Turnover rate -10,87 % -15,57 % -26,17 %
1st half of year 2nd half of year YearPurchases 78.248.937,88 28.844.492,15 107.093.430,02 Sales 48.361.866,23 43.999.837,37 92.361.703,60 Total 1 126.610.804,11 72.844.329,52 199.455.133,62 Subscriptions 80.809.536,06 32.343.082,54 113.152.618,60 Redemptions 51.100.595,80 47.263.803,79 98.364.399,59 Total 2 131.910.131,86 79.606.886,33 211.517.018,19 Monthly average of total assets
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 348.250,04 348.250,04 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 10.661.928,41 227.171,25
2012 - 12 104.406.328,96 89.134.070,61
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 10.816.876,89 291,14
2012 - 12 29.435.948,87 351,70
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0171890065 EUR 19.14% 15.85% 5.20% 0.0234 01/10/1999 -2.73%
DIV BE0171889059 EUR 19.21% 15.83% 5.19% 0.0233 01/10/1999 -2.73%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228539720 EUR 19.23% 25/11/2011 26.47%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 1.20 EUR net (1.60 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.657% Classic Shares Capitalization: 1.691% Institutional B Shares Capitalization: 1.634% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 15,422 9,482 61.49%
CSFBSAS 23,072 14,242 61.73%
DEUTSCHE 6,187 3,867 62.50%
EQ CSA MACQUARIE 13,017 8,136 62.50%
JP MORGAN 1,359 790 58.08%
MERRILL 6,869 4,252 61.90%
MORGAN STANLEY 7,277 4,253 58.44%
NOMURA 30,752 18,860 61.33%
UBSWDR 1,985 1,121 56.44%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 22.518,78 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
BYD CO LTD -H- HKD 5.499 23,250 12.511,55
CASIO COMPUTER CO JPY 2.799 753,000 18.488,13
CHINA RESOURCES ENTERPRISE HKD 1.141 27,950 3.120,84
CROWN LTD AUD 310 10,670 2.604,69
FAIRFAX MEDIA LTD AUD 1.241 0,510 498,39
FAST RETAILING CO LTD JPY 200 21840,000 38.315,79
GENTING SINGAPORE PLC SGD 47.503 1,385 40.851,70
GREAT WALL MOTOR CO LTD -H- HKD 31.999 24,450 76.563,12
GUANGZHOU AUTOMOBILE GROUP -H HKD 17.999 6,870 12.100,67
HAIER ELECTRONICS GROUP HKD 17.999 11,340 19.974,03
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FRANCE 2003 2,25% 25/07/2020 EUR 131.000 EUR 190.611,94
OAT FRANCE 2003 4% 25/04/14 EUR 146.000 EUR 157.638,10
Total 348.250,04 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Eastern Europe
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND EASTERN EUROPE
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 6 October 1995 Initial subscription price: 20000 BEF Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 1218.24 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of companies in Central and Eastern European countries where conditions are such as to ensure accelerated economic growth in the short or medium term.
RISK CONCENTRATION Shares of Central and Eastern Europe.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to CSOB Asset Management a.s., Radlicka 333/150 , 150 57 Praha 5, CZECH REPUBLIC..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Equities globally had a strong start at the beginning of the year. ECB introduced second round of long term refinancing operations (LTRO), Greece received new aid package and European stability mechanism fund (ESM) increased its capacity. Two rounds of LTROs reached altogether stunning 1 trillion EUR of liquidity provided by ECB. In the second quarter, worse macro data in Europe, China and US showed global slow-down may be sharper than previously expected. During summer, markets were expecting ECB to come up with some decisive action. In September, ECB governor Mario Draghi announced direct purchase program of government bonds on secondary markets. Credit risk premium on troubled countries began falling bringing relief to equity markets as well. Situation in US has been overall improving during the year despite some short term swings. Potential problems were smoothed out by FED. FED expressed its will to keep record low rates until 2015 and has launched a new round of quantitative easing (3rd one already). FED expects to hold very loose monetary policy as long as unemployment remains above 6.5 % or until inflation picks up above 2.5 %. It was welcomed by investors.
Looking at the region, the winner and best performing market was Turkish. Turkey seemed to decouple from the overall risk-off/on changes in global sentiment. Turkish GDP grew healthy in the range of 3 - 4 % dispelling worries over hard landing. Current account deficit, long term concern, was steadily easing from previous year highs. On top of that, Fitch upgraded Turkish credit rating to investment grade in November bringing fresh capital into the market as a consequence. The Turkish market increased by 58 % in eur terms (local index). We started the year with cautious approach towards Turkish assets given the risk of abrupt capital outflows in the case of deteriorating situation in Europe. However, lower commodity prices and surprisingly (for us) successful monetary policy made us to change our view towards Turkey. From the second quarter on, we increased our exposure to Turkey with positive effects on the fund performance. Surprisingly the Russian stock market did not perform as well as expected given the strong economic growth and high average oil prices. The Russian index lagged not only behind western markets but also EM peers. International investors were held back given a series of long term negative factors such as high corruption and poor corporate governance as well as strong national protests against Putin’s establishment. Our exposure to Russia was swinging mirroring Turkish allocation. After FED announced third round of quantitative easing, we started to favour Russian equities together with Turkish in the expense of Central European region. Central European (CE) markets followed global trend also with positive returns for investors in 2012. Despite Czech and Hungarian economy fell into recession once again, equity market increased by 15.5 %, resp. 15.9 % (local indices, in EUR). However, best market was Polish, which increased by 31.9 % in EUR terms (local index, WIG20) supported by start of a monetary easing cycle and above average growing economy. Either due to weak economy, relatively rich valuations or political uncertainties we were underweighting Central European equities for most of the year. KBC Equity Fund Eastern Europe increased by 26.9 % in 2012, beating MSCI Emerging Europe by 4.2 % mainly thanks to higher exposure to Turkey and good stock picking in major markets.
2.1.8 FUTURE POLICY Necessary structural changes have not been made in Euro zone and we think debt concerns may hang over the markets again during this year. However, we expect loose monetary conditions in major economies to prevail, which should be favourable for global equities and emerging markets specifically. Situation in US is slowly improving and we think it will keep so. Political talks about debt stock level and its limitation may cause some short term concerns, but politicians don’t have much to choose from. Spending cuts and higher taxes will be, most likely, put off to better times. In Asia, China seems to succeed in supporting its economy and to get back on soft landing track. Therefore, we keep mildly bullish scenario for global equities and emerging markets. Within Central and Eastern European region, we favour Turkish and Russian companies in the expense of Central Europe. We see Russia and Turkey as growing countries with improving fundamentals or soft landing paths, while Central Europe is either in recession or faces sharp slow-down with relatively rich valuation.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 57.048.893,24 57.632.538,47
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 11.235.115,50 3.491.199,43 C. Shares and similar instruments a) Shares 57.133.147,75 57.754.483,92 Of which securities lent 9.801.404,37 2.795.148,78 E. Open-end undertakings for collective investment 0,57 0,62
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 126.592,63 28.405,24 B. Payables a) Accounts payable (-) -229.599,55 -145.605,25 c) Borrowings (-) -52.018,98 -131.663,32 d) Collateral (-) -11.235.115,50 -3.491.199,43
V. Deposits and cash at bank and in hand A. Demand balances at banks 132.693,87 158.756,38
VI. Accruals and deferrals A. Expense to be carried forward 1.515,69 B. Accrued income 151,69 60.765,76 C. Accrued expense (-) -62.074,74 -94.120,57
TOTAL SHAREHOLDERS' EQUITY 57.048.893,24 57.632.538,47
A. Capital 37.282.886,36 51.695.382,82
B. Income equalization -32.500,76 -282.494,29
C. Profit(Loss) carried forward 5.762.426,62 30.327.744,30
D. Result for the period 14.036.081,02 -24.108.094,36
IX Financial instruments lent 9.801.404,37 2.795.148,78
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 12.543.472,44 -22.537.182,80 b) Closed-end undertakings for collective
investment 1.473,86 -3.111,84
D. Other securities -84,52 E. Open-end undertakings for collective investment -0,04 61.815,51 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 897.821,31 -2.506.384,06
II. Investment income and expenses A. Dividends 1.701.150,38 2.223.411,18 B. Interests a) Securities and money market instruments -10.479,48 80.512,67 b) Cash at bank and in hand and deposits 3.945,97 64.961,85 C. Interest on borrowings (-) -3.333,99 -3.068,00
III. Other income B. Other 210.064,87
IV. Operating expenses A. Investment transaction and delivery costs (-) -73.844,22 -222.843,55 B. Financial expenses (-) -841,46 -3.304,93 C. Custodian's fee (-) -45.367,39 -39.501,00 D. Manager's fee (-) a) Financial management Classic Shares -875.170,54 -1.224.399,16 b) Administration and accounting management -56.790,05 -85.624,44 E. Administrative expenses (-) -575,21 -8,79 F. Formation and organisation expenses (-) -4.627,70 -9.147,60 G. Remuneration, social security charges and
pension -4,20 -19,34
H. Services and sundry goods (-) -10.461,29 -18.698,53 J. Taxes Classic Shares -24.400,03 -42.504,67 K. Other expenses (-) -5.887,34 -52.977,21
Income and expenditure for the period Subtotal II + III + IV 593.313,45 876.853,35
V. Profit (loss) on ordinary activities before tax 14.036.081,02 -24.108.094,36
VII. Result for the period 14.036.081,02 -24.108.094,36
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 19.766.006,88 5.937.155,65 Profit (loss) brought forward from the previous
financial year 5.762.426,62 30.327.744,30
Profit for the period available for appropriation 14.036.081,02 -24.108.094,36 Income on the creation of shares (income on the
cancellation of shares) -32.500,76 -282.494,29
II. (Appropriations to) Deductions from capital -19.630.680,62
III. Profit (loss) to be carried forward 5.762.426,62
IV. (Dividends to be paid out) -135.326,26 -174.729,03
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND EASTERN EUROPE
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Closed-end funds
Listed closed-end investment funds
Luxembourg
RENAISSANCE AM GLOBAL FD RUSS EQUITY - 0,09 USD 8,370 0,57
U.S.A.
UKRAINE FUND - 2.000,00 USD 0,000 0,00
Total investment funds 0,57
Shares
Exchange-listed shares
Austria
ERSTE GROUP BANK AG - 17.000,00 EUR 24,025 408.425,00 0,72 0,72
Czech Republic
CEZ A.S. - 10.000,00 CZK 680,000 270.959,52 0,47 0,48
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND EASTERN EUROPE
(IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 7.182.624,16 7.618.485,50 14.801.109,66 Sales 17.077.987,92 11.750.110,74 28.828.098,65 Total 1 24.260.612,08 19.368.596,24 43.629.208,31 Subscriptions 1.975.724,61 1.967.480,86 3.943.205,47 Redemptions 11.669.226,85 6.697.738,09 18.366.964,94 Total 2 13.644.951,46 8.665.218,95 22.310.170,41 Monthly average of total assets
58.972.324,09 56.013.997,57 57.487.023,22
Turnover rate 18,00 % 19,11 % 37,08 %
1st half of year 2nd half of year YearPurchases 7.182.624,16 7.618.485,50 14.801.109,66 Sales 17.077.987,92 11.750.110,74 28.828.098,65 Total 1 24.260.612,08 19.368.596,24 43.629.208,31 Subscriptions 1.975.724,61 1.967.480,86 3.943.205,47 Redemptions 11.669.226,85 6.697.738,09 18.366.964,94 Total 2 13.644.951,46 8.665.218,95 22.310.170,41 Monthly average of total assets
58.949.692,44 56.165.069,45 57.662.657,96
Corrected turnover rate 18,01 % 19,06 % 36,97 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 11.235.115,50 11.235.115,50 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Institutional B Shares Change in number of shares in circulation: Nil Amounts received and paid by the UCI: Nil Net asset value: Nil
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0156153802 EUR 26.92% 6.43% -7.88% 11.65% 06/10/1995 6.96%
DIV BE0156154818 EUR 26.91% 6.41% -7.89% 11.64% 06/10/1995 6.95%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
The cumulative returns are shown where they relate to a period of at least one year.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Dividend on ex-dividend date 28/03/2013: 11.07 EUR net (14.76 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.806% Classic Shares Capitalization: 1.804% Institutional B Shares Capitalization: Not applicable * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 1,726 363 21.05%
CSFBSAS 4,674 2,231 47.73%
DEUTSCHE 3,888 932 23.96%
HSBC 11,495 2,739 23.83%
JP MORGAN 222 124 55.56%
MORGAN STANLEY 2,808 1,531 54.54%
NOMURA 862 465 53.97%
UBSWDR 348 187 53.85%
WOOD 8,147 1,834 22.51%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.6% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. CSOB Asset Management a.s. receives a fee from the management company of max. 1.6% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek.
Name Maximum management fee KBC Equity Fund-Eastern Europe-Classic Shares 1,60 KBC Equity Fund-Eastern Europe-Institutional B Shares 1,60
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to -2.649,71 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
BANK PEKAO SA PLN 17.499 167,500 718.349,75
GEDEON RICHTER HUF 1.999 36210,000 248.553,64
KGHM POLSKA MIEDZ SA PLN 26.499 190,000 1.233.931,33
MAGYAR OLAJ-ES (BUD) HUF 11.499 17755,000 701.067,05
OTP BANK RT. HUF 41.999 4150,000 598.502,34
POLISH OIL & GAS PLN 599.999 5,210 766.118,86
POLSKI KONCERN NAFTO PLN 119.999 49,500 1.455.763,18
POWSZECHNY ZAKLAD UBEZPIECZEN SA PLN 24.999 437,000 2.677.392,10
Total 9.801.404,37
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FLEMISH COMMUNITY - 09/14 3.75% 31/03 EUR 10.500.000 EUR 11.235.115,50
Total 11.235.115,50 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Growth by Innovation
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND GROWTH BY INNOVATION
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 28 May 1998 Initial subscription price: 20000 BEF Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 131.05 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in a global selection of shares issued by high-potential growth companies. In particular, this involves companies where the focus on research and development generates extra added value. To overcome any liquidity problems, the sub-fund may, be temporary and ancillary invest in other securities.
RISK CONCENTRATION Growth shares.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR The fund invests in a global selection of innovative companies, that is, companies whose investment in Research and Development is expected to drive future growth and returns. Equity markets moved considerably higher at the start of 2012. The Fed’s announcement that rates will remain low until at least late 2014, record results from Apple and positive US GDP growth numbers were the key support factors for equity markets. It was not all good news however, as major French banks were downgraded and concerns about the Greek ‘private’ debt restructuring continued to prevail. Into February and after a short pause, markets climbed higher again in the second half of the month. Regionally, the euro area markets strongly outperformed with investors becoming convinced that after two years of crisis, the region has succeeded in isolating the Greek question. The risks of severe damage to the European economy as a whole and for the financial sector in particular fell sharply. Towards the end of the first quarter, positive macroeconomic developments, especially in the US, the successful Greek debt restructuring and the liquidity injection by central banks drove equity markets modestly higher in March. Towards the end of the month, investors’ optimism was tempered by worries over the risks for a hard landing in China and the rise in government bond yields throughout the world. The beginning of the second quarter saw a global pullback on equity markets, prompted by a slowdown in Chinese growth to its lowest level since Q2 2009, poor EU and US economic data and confirmation that the UK and Spain had slide back into recession. The European debt crisis flared up again as yields surged on Spanish bonds, the Dutch government resigned and Presidential Election in France lead to much political uncertainty. Euro area concerns escalated in May as Greek exit fears rose after elections in the country produced a stalemate and the country was unable to form a government. Statements from various European officials alluding to the fact that an exit scenario had been discussed sent markets into a tailspin. Sentiment was further hit when periphery yields spiked after Spain partially nationalized Bankia, Spain’s second largest mortgage lender. As the end of the second quarter approached, equity markets surged on the final trading day of the June after unexpected policy responses from the EU Summit, involving an agreement to use the ESM to recapitalise banks directly and take steps towards banking union soothed market nerves and increased appetite for risk assets. Victory for the pro-EU/Bailout New Democrats in Greece also supported markets. Into the second half of the year main market developments for the quarter saw Central Banks around the world implementing a new round of monetary easing in July to avoid a slide into a fresh recession. The ECB cut each of its key rates by 25 bps, bringing the main refi rate to 0.75% - a record low and the deposit rate to 0%. Later in the month, Draghi’s comments that the “Euro is irreversible” and that the ECB will do whatever it takes to preserve the currency sparked a month-end rally in stocks globally. In the UK, the Bank of England implemented an additional GBP 50 billion of QE while in China, the PBOC cut deposit and lending rates to 3% and 6% respectively. The equity rally ran out of steam in August amid holiday season in Europe and the U.S, with little news or market developments to influence sentiment. In the US, unemployment figures continued to worsen. The Fed’s chief Bernanke hinted that the Fed was willing to provide additional policy stimulus in the near term in order to ‘promote a stronger economic recovery and sustained improvement in labour market conditions’. Overall data releases from China were weak with declining exports, industrial production and manufacturing figures. Global markets had a positive month towards quarter-end buoyed by the ECB decision to allow unlimited purchasing of short-dated bonds (under the Outright Monetary Transactions operation), of countries who have entered fiscal adjustment programmes. Following this, the German court’s decision to back the EU bailout and the announcement from the Fed that it was introducing QE3 boosted investor confidence and lead markets to rally. Into the final quarter of the year and main market developments saw consumer spending, confidence and housing indicators in the U.S remain largely positive, while in Europe the ECB left its main interest rate unchanged at 0.75%. Towards quarter-end the FOMC expanded QE in the US, by adding at additional $45 billion per month of open-ended Treasury security purchases, while the fiscal cliff has been averted by a last minute deal, but with no agreement on the debt ceiling it is likely that this issue will return in the near future. The EU approved the disbursement of the next tranche of Greek aid. The region’s stock markets were buoyed towards the end of the quarter as perceptions grew that the debt crisis had stabilized somewhat.
In terms of the performance of KBC Equity Fund Growth by Innovation, the first quarter was relatively robust. A rally started in early January and was sustained to quarter end, with the fund gaining over the period, slightly ahead of the broad market. The outperformance was mainly due to the industry group allocation within the fund, with positive contributions coming most notably from the overweight positions in the technology and automotive segment and the underweight position in telecommunication services and food, beverage & tobacco. Stock selection however weighted on performance slightly, with the positions in Halliburton, Ericsson and Bristol-Myers Squibb impacting performance negatively. The second quarter however was more volatile and the fund lagged against the broad market in each month. Industry group allocation was again the main contributor, albeit negatively this time for nearly exactly the same segments as in the first quarter of 2012. On a stock specific level, the overweight position in Nokia, Petrobras, Gazprom and Sony added to the underperformance of the fund against the broad market in the second quarter. While the fund performed positively in absolute terms over the third quarter, KBC Equity Fund Growth by Innovation lagged the broad market slightly during this period. Stock selection was the main driver of positive performance over the quarter. In particular, positions in the energy and pharmaceuticals group contributed positively to performance over the period. Within the energy sector, Petroleum Geo-Services was among the main positive contributors to performance, after the the oilfield surveyor reported that second quarter earnings would exceed expectations. On the negative side, the technology hardware and equipment group offset some of these gains, due to the fund’s overweight positions in such names as Canon and QLogic, which suffered declines in the period. During the fourth quarter, the fund fell in absolute terms, underperforming the broad market over the period. Industry group allocation was the main contributor to negative performance over the last quarter, with the overweight positions in the information technology sector impacting performance. This was however somewhat offset on the stock-picking side with the increase in the share price of Canon following the announcement that its year-end dividend would increase. While KBC Equity Fund Growth by Innovation performed positively in absolute terms over the year, it was overall a disappointing year for the fund in relative terms with the fund underperforming the broad market in 2012.
2.1.8 FUTURE POLICY While we expect global growth to be positive looking forward into 2013, developed markets are being highlighted as the point of weakness with only modest expansion expected. We expect positive, albeit modest growth in the US over the coming quarters, with the gradual upturn of the US housing market and a cautious decline in the rate of unemployment. The ongoing fiscal crisis in the Eurozone is expected to continue its negative influence on growth. Despite the European Central Bank’s efforts to control and address the crisis, Europe remains in an unstable condition. Economic releases for the Eurozone countries are not supportive with overall GDP figures expected to contract in the first half of 2013, with no type of recovery expected until at least the second half of the year. A second cause of concern is the fiscal restructuring as a result of the credit crisis that remains, almost 5 years on, for both the US and Eurozone. The fiscal austerity that is being forced upon consumers is making stable domestic growth for many countries virtually impossible. While a political crisis has been averted in the US after a last minute agreement regarding the fiscal cliff, this may only be a short term solution in advance of the debt ceiling debate to follow in February. In the emerging markets, the scenario is different with economic growth expected to continue in 2013. The strongest growth dynamic is to be found in emerging Asia. While growth is expected to continue in China, as confirmed by sustained improvement in confidence indicators, it may be more modest than in previous years, as policy makers in China as well as the rest of Asia continue to focus on inflationary pressure. In line with the theme, KBC Equity Fund Growth by Innovation will continue to invest in a global selection of innovative companies, that is, companies whose investment in Research and Development is expected to drive future growth and returns.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 64.736.622,53 28.623.901,83
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 124.731,20 147.658,50 a} Collateral received in the form of bonds 1.080.412,29 294.116,53 C. Shares and similar instruments a) Shares 64.321.443,60 28.351.728,53 Of which securities lent 988.663,60 312.549,15 D. Other securities 2.285,30 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -1.260,48 477,21 m) Financial indices Futures and forward contracts (+/-) -787,49 621,83
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 25.042,91 126,17 b) Tax assets 2.496,24 4.500,00 c) Collateral 7.271,47 7.893,38 B. Payables a) Accounts payable (-) -34.323,28 -38.268,51 d) Collateral (-) -1.080.412,29 -294.116,53
V. Deposits and cash at bank and in hand A. Demand balances at banks 307.748,83 175.613,85
VI. Accruals and deferrals A. Expense to be carried forward 1.583,49 B. Accrued income 58.944,10 29.711,70 C. Accrued expense (-) -74.684,57 -60.029,62
TOTAL SHAREHOLDERS' EQUITY 64.736.622,53 28.623.901,83
A. Capital 44.064.707,45 12.194.286,25
B. Income equalization 16.747,42 -100.393,64
C. Profit(Loss) carried forward 16.427.868,94 20.858.516,64
D. Result for the period 4.227.298,72 -4.328.507,42
I.A.B Cash at bank and in hand/deposits 7.271,47 7.893,38
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 243.838,11 215.846,91
IX Financial instruments lent 988.663,60 312.549,15
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -22.927,30 167,20 C. Shares and similar instruments a) Shares 5.228.534,52 -4.808.375,59 D. Other securities 410,22 -409,60 F. Derivative financial instruments l) Financial indices Futures and forward contracts 18.651,00 621,83 H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -1.737,69 477,21 b) Other foreign exchange positions and
transactions -1.354.666,14 450.176,95
II. Investment income and expenses A. Dividends 1.153.775,75 757.608,89 B. Interests a) Securities and money market instruments 40.733,88 26.709,64 b) Cash at bank and in hand and deposits 1.060,37 2.096,13 C. Interest on borrowings (-) -1.808,27 -2.304,91
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
220.655,46 9.469,31
B. Other 3.968,63
IV. Operating expenses A. Investment transaction and delivery costs (-) -134.686,15 -91.157,20 B. Financial expenses (-) -749,34 -1.862,85 C. Custodian's fee (-) -24.274,70 -39.006,15 D. Manager's fee (-) a) Financial management Classic Shares -90.396,35 -521.643,28 Institutional B Shares -687.745,25 -34.624,95 b) Administration and accounting management -56.165,72 -38.060,27 E. Administrative expenses (-) -9,05 F. Formation and organisation expenses (-) -4.005,70 -4.486,24 G. Remuneration, social security charges and
pension -4,24 -9,59
H. Services and sundry goods (-) -9.380,82 -8.831,44 J. Taxes Classic Shares -5.153,53 -18.775,15 Institutional B Shares -7.202,84 11.522,07 K. Other expenses (-) -35.609,39 -21.778,06
Income and expenditure for the period Subtotal II + III + IV 359.034,11 28.834,58
V. Profit (loss) on ordinary activities before tax 4.227.298,72 -4.328.507,42
VII. Result for the period 4.227.298,72 -4.328.507,42
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 20.671.915,08 16.429.615,58 Profit (loss) brought forward from the previous
financial year 16.427.868,94 20.858.516,64
Profit for the period available for appropriation 4.227.298,72 -4.328.507,42 Income on the creation of shares (income on the
cancellation of shares) 16.747,42 -100.393,64
II. (Appropriations to) Deductions from capital -20.667.998,07
III. Profit (loss) to be carried forward 16.427.868,94
IV. (Dividends to be paid out) -3.917,01 -1.746,64
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND GROWTH BY INNOVATION
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND GROWTH BY
INNOVATION (IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 32.935.343,90 29.061.136,92 61.996.480,82 Sales 13.114.372,49 16.907.922,80 30.022.295,30 Total 1 46.049.716,40 45.969.059,72 92.018.776,11 Subscriptions 37.672.371,51 38.965.412,37 76.637.783,88 Redemptions 17.846.812,57 26.847.393,99 44.694.206,56 Total 2 55.519.184,08 65.812.806,36 121.331.990,44 Monthly average of total assets
50.004.021,02 62.314.148,31 56.159.084,66
Turnover rate -18,94 % -31,84 % -52,20 %
1st half of year 2nd half of year YearPurchases 32.935.343,90 29.061.136,92 61.996.480,82 Sales 13.114.372,49 16.907.922,80 30.022.295,30 Total 1 46.049.716,40 45.969.059,72 92.018.776,11 Subscriptions 37.672.371,51 38.965.412,37 76.637.783,88 Redemptions 17.846.812,57 26.847.393,99 44.694.206,56 Total 2 55.519.184,08 65.812.806,36 121.331.990,44 Monthly average of total assets
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
Capitalization Distribution Capitalization Distribution
2011 - 12 22.712.001,00 653.789,05
2012 - 12 73.742.413,48 42.218.001,71
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 23.266.976,69 143,19
2012 - 12 58.333.078,27 161,35
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0167682666 EUR 11.46% 9.04% 0.32% 0.0849 28/05/1998 -7.48%
DIV BE0167681650 EUR 11.52% 9.06% 0.33% 0.0849 28/05/1998 -7.47%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228547806 EUR 11.52% 25/11/2011 19.67%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 0.51 EUR net (0.68 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.66% Classic Shares Capitalization: 1.711% Institutional B Shares Capitalization: 1.639% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 27,928 16,930 60.62%
CSFBSAS 3,241 2,015 62.18%
DEUTSCHE 842 481 57.14%
EQ CSA MACQUARIE 593 370 62.50%
MERRILL 9,318 6,179 66.32%
MORGAN STANLEY 3,024 1,792 59.25%
NOMURA 14,738 9,017 61.18%
UBSWDR 2,608 1,630 62.50%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The Euro Stoxx 50 is a weighted equity index computed by Stoxx Ltd. The dividend is not reinvested. The main purpose of this index is to provide a continuous indication of market trends on the European stock markets. The base value of the index is 1000, calculated on the basis of the underlying prices recorded on 31 December 1991. The Euro Stoxx 50 consists solely of shares from countries participating in the Economic and Monetary Union, with the exception of Luxembourg. On 10 April 1998, the following stock exchanges were included in the index: Austria (Vienna), Belgium (Brussels), Finland (Helsinki), France (Paris), Germany (Frankfurt), Italy (Milan), Ireland (Dublin), the Netherlands (Amsterdam), Portugal (Lisbon) and Spain (Madrid). The index consists of the 50 largest European shares in terms of shares that are freely negotiable, and the shares are accordingly weighted on the basis of this criterion. The Euro Stoxx 50 is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Stoxx Limited has all proprietary rights with repect to the index. In no way Stoxx Limited endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Stoxx Limited disclaims any liability for the issue and offering of the shares of this undertaking for collective investment.
The S&P 500 is an equity index computed by Standard & Poor’s that is made up of 500 shares. The dividend is not reinvested. The S&P 500 serves primarily as a continuous indicator of market trends on the US stock markets. The value of the S&P 500 index is calculated on the basis of the market value of the shares of 500 companies at a given point in time, compared to the market value of the shares of 500 similar companies during the reference period from 1941 to 1943. The index is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Standard & Poor’s has all proprietary rights with repect to the index. In no way Standard & Poor’s endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Standard & Poor’s disclaims any liability for the issue and offering of the shares of this undertaking for collective investment The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 8.714,29 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
BYD CO LTD -H- HKD 35.499 23,250 80.768,76
DISCO CORP JPY 9.000 4475,000 353.289,47
NOKIA CORP -A- EUR 98.375 2,926 287.845,25
RESEARCH IN MOTION LIMITED CAD 3.500 11,800 31.461,87
SONY JPY 28.000 958,000 235.298,25
Total 988.663,60
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 6.000 EUR 7.330,82
OAT FRANCE 2003 4% 25/04/14 EUR 47.000 EUR 50.746,51
FRANCE 2004 1,60% 25/07/2015 EUR 171.000 EUR 219.735,34
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 728.000 EUR 802.599,62
Total 1.080.412,29 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Finance
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND FINANCE
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 27 March 1998 Initial subscription price: 20000 BEF Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 268.5 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of companies in the financial sector where conditions are such as to allow accelerated economic growth in the short or medium term.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate throughout 2012. The debt crisis in Europe continued to rage unabated. Five euro countries requested a bailout from the European emergency fund. Greece reached agreements with its private sector creditors on two occasions in the span of one year on restructuring the bond debt it owes them. Spain found itself in the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the existence of the euro was not at issue.
A new feature of this crisis compared to previous ones is that government paper, which had previously been seen as entirely risk-free, also started to be tainted with a degree of credit risk. What started as an isolated problem on the periphery of the euro area developed into an issue concerning the credibility of the monetary union and its institutions. In autumn 2009 – three years ago already – it became clear that Greece's official statistics had painted a highly flattering picture of its public finances; as a result, bond investors lost confidence and many refused to continue to fund Greece. After Greece had elaborated its own bailout programme (April 2010), it rapidly became clear that the EMU needed a structured bailout framework. This initially took the form of the European Financial Stability Facility (EFSF, May 2010) and from 1 October 2012 the permanent European Stability Mechanism (ESM), a fully-fledged supranational institution with its own legal personality. The Greek debacle and lack of political consensus on a blueprint for a renewed currency union continued to fuel mistrust among bond investors. Ireland (November 2010), Portugal (April 2011), once again Greece (July 2011), Cyprus (June 2012) and Spain (with the bailout fund for the banks in June 2012) had to concede that they were no longer able to raise funds in the market and took shelter under the European umbrella. The support of Europe (and the IMF) is dependent on strict austerity policies, which are periodically reviewed. The Greek government's first, rather draconian, austerity plan was not stringent enough and came up against much political opposition. The period July 2011 – May 2012 was one of complete political chaos. In March 2012 agreement on debt restructuring was concluded with private bondholders, under which Greece was able to eliminate more than 100 billion euros in debt. In December 2012 the European partners relaxed the interest and repayment terms on bailout fund loans to Greece. As a result of all these operations Greece's debt ratio remained sky-high (190% of GDP at the end of 2012), but the financing burden has become appreciably more realistic and there has been a marked change in bond ownership patterns: over 80% of Greek debt is now held by the public sector (European governments, central banks and the IMF). Speculation concerning the Greek exit from the EMU has dried up. In the course of 2012 the markets shifted their attention from Greece to Spain. The Spanish government has already drawn on the EFSF for the recapitalisation of its banks. In the meantime other problems are also attracting attention: the recession is deeper than had been thought, the austerity policy was already revised as many as four times in the course of 2012 and regional finances are seriously dislocated. In a lengthy address on 3 August, Prime Minister Mariano Rajoy once again emphasised the severity of the situation and drew the attention of the Spanish people to their responsibilities, while also not ruling out immediate cooperation with the EFSF. By the end of the period under review, no formal application for aid had, however, been filed. As traditionally faithful investors in government bonds, the European banks, which had seen their capital base seriously eroded in the 2008/09 credit crisis, were oversensitive to the consequences of the euro crisis and the write-downs on their bond portfolios. The euro crisis could therefore easily end up as a systemic crisis. Avoiding this provided the driver for the European Central Bank (ECB) to intervene actively, especially by buying Spanish and Italian government paper. After Draghi took over from Trichet at the ECB, the heavy artillery was brought in. In December 2011 and in February 2012 two LTRO programmes were launched under which banks were able to borrow on extremely favourable conditions for a term of 36 months. Funds totalling 1 000 billion euros were borrowed, to be invested primarily in Spanish and Italian bonds. In September the ECB introduced its bazooka in the form of Outright Monetary Transactions (OMT). The ECB expressed its willingness to buy up troubled government debt with maturities of up to three years for an unlimited period and in unlimited quantities, provided a number of conditions have been met. The most important of these is that the government in question submits a formal request for a bailout under the ESM. For this reason the OMT programme has so far been unable to start up. The financial markets have not been disturbed by this. For them the setting up of the European bazooka was enough in itself to regard the euro crisis as having been definitively averted. Public finances have gone off the rails not only in the EMU, but also in the UK and the US. The budget debate in the US has become mired in a political impasse. The divisions between Republicans and Democrats are considerable and are ideologically driven. Aware of their inability to work out a policy and fearful that the stalemate could lead to an uncontrolled explosion in debt, the parties passed automatic spending cuts into legislation to reduce the budget deficit over a period of ten years to 3% of GDP. In extremis the retiring Congress decided on New Year's Day to delay automatic spending cuts until 1 March 2013.
The Fed had already cut its key rate very early on in the crisis. Since December 2008 the rate has been a symbolic 0.25%. The European Central Bank waited considerably longer before cutting interest rates. When Mario Draghi took the helm at the ECB on 1 November 2011, Europe also adopted monetary easing measures. Its key rate is 0.75% at present. Despite the difficulties referred to above, Financials were among the best-performing sectors. The outperformance of the Banks is no doubt associated with the quantitative easing programmes undertaken by the central banks. That entails the Fed’s QE3 and, more especially, the announcement of OMT by the ECB, which eased the pressure of the euro crisis.
2.1.8 FUTURE POLICY We are expecting US growth to remain positive but modest (around 1.5-2% y-o-y in the coming quarters) as job growth remains moderate, pay increases are barely keeping pace with inflation and budgetary policy has now finally (and probably for many years) struck down the path of austerity. The fragile recovery of the housing market and of corporate investment could be sustained. In Europe the budgetary plans, tighter lending policy of the banks and major uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could therefore see a contraction of European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified. After much squabbling between the Democrats and Republicans a compromise was after all reached on New Year's Day concerning the most urgent budgetary issues. The agreement creates certainty as to households’ tax position, while the budget deficit is to be reduced sharply by a mix of tax increases and spending cuts. The agreement is however insufficient to restore US federal finances to sound health. Further measures are in the offing and a fresh programme of cuts may be expected as early as spring 2013. While that may be regarded as certain, how far the cuts go, what form they take and over what timeframe they will be spread out will need to become clear in the coming months. Time is of the essence for the euro area. Everyone knows that the EMU is not a perfect monetary union. In its twelve-year history, little has been done to improve its internal operation. National autonomy was off-limits. The crisis brought the realisation that economic governance, as it is now called in Eurospeak, needs to be tackled as a matter of urgency. In concrete terms, this involves measures such as supranational supervision of banks, strict monitoring and sanctioning of budgetary policy, monitoring of pay policy and harmonising European taxation. In the coming months the organisation of the ESM (European Stability Mechanism, which came into operation on 1 October 2012), the installation of the pan-European banking supervision within the ECB (to be in place by 1 March 2014) and the implementation of the Fiscal Stability Treaty (in force since 1 January 2013) will continue to demand considerable energy and diplomatic dexterity. Work on a new architecture for the EMU cannot be postponed, even though the European leaders are having to turn their attention from one emergency to another, which is not conducive to a calm climate for negotiations. The capital base of banks will need to be strengthened further to ensure the stability of the financial system, so that there is a sufficient buffer for reserves and to offset unforeseen write-downs. That will be just as important in 2013 – and probably after that too – as it was in 2011 or 2012. All the measures required to achieve this are being taken. Examples include the almost 2 000 billion euros that were set aside in the space of two years in order to ensure the smooth funding of European governments, the introduction of stress tests to establish whether the banks have sufficient capital to cope with a new and serious crisis, the gradual introduction of new and/or stricter capital requirements under Basel III and making the reserves of the ESM available for direct loans to ailing European banks. There is a chance that volatility might return to the financial sector. We will therefore compose the fund’s defensive aspect by investing within the insurance sector in reinsurers and non-life insurers. We anticipate positive returns – also after the recent rally – in the medium term if financial service providers manage to record a somewhat more normal return on equity, and if European policymakers can finally achieve lasting solutions in terms of reorganising public-sector finances.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 313.581.664,26 118.476.271,34
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 887.289,51 621.210,95 a} Collateral received in the form of bonds 7.741.623,22 6.979.359,26 C. Shares and similar instruments a) Shares 297.581.000,26 114.988.968,61 Of which securities lent 7.150.773,82 7.426.686,50 D. Other securities 20.526,47 8.323,15 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -28.324,85 m) Financial indices Futures and forward contracts (+/-) -74.250,00 n) Derivative financial instruments Swap contracts (+/-) -108.216,00 2.293.650,00
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 17.231,58 1.572,40 b) Tax assets 32.952,05 34.884,46 c) Collateral 217.000,00 B. Payables a) Accounts payable (-) -131.756,99 -272.282,56 d) Collateral (-) -7.741.623,22 -6.979.359,26
V. Deposits and cash at bank and in hand A. Demand balances at banks 15.430.282,55 719.232,64
VI. Accruals and deferrals A. Expense to be carried forward 5.380,79 B. Accrued income 201.809,30 196.392,44 C. Accrued expense (-) -349.454,47 -235.486,69
TOTAL SHAREHOLDERS' EQUITY 313.581.664,26 118.476.271,34
A. Capital 265.813.066,08 122.470.554,42
B. Income equalization 456.092,44 -1.513.795,67
C. Profit(Loss) carried forward 50.228.159,82
D. Result for the period 47.312.505,74 -52.708.647,23
I.A.B Cash at bank and in hand/deposits 217.000,00
III Notional amounts of futures and forward contracts
III.B Written futures and forward contracts -3.329.928,11
IV Notional amounts of swap contracts (+) 27.000.000,00 13.500.000,00
IX Financial instruments lent 7.150.773,82 7.426.686,50
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -115.159,75 11.375,82 C. Shares and similar instruments a) Shares 51.017.232,00 -56.121.757,39 D. Other securities -1.579,76 -266.196,17 F. Derivative financial instruments l) Financial indices Option contracts 28.000,00 Futures and forward contracts -93.550,00 -1.245.405,00 m) Derivative financial instruments Swap contracts (+/-) -1.617.350,69 1.317.950,00 G. Receivables, deposits, cash at bank and in hand
and payables 0,01
H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts 28.324,85 18.826,56 Swap contracts (+/-) -0,78 b) Other foreign exchange positions and
transactions -4.294.736,07 2.060.121,84
II. Investment income and expenses A. Dividends 5.577.255,42 4.664.650,96 B. Interests a) Securities and money market instruments 332.898,26 73.911,21 b) Cash at bank and in hand and deposits 69.432,85 47.139,67 c) Collateral (+/-) -3.373,15 C. Interest on borrowings (-) -1.063,38 -2.749,52
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
777.148,20 22.647,35
B. Other 15.416,03
IV. Operating expenses A. Investment transaction and delivery costs (-) -556.387,73 -351.215,95 B. Financial expenses (-) -2.797,93 -7.147,24 C. Custodian's fee (-) -97.611,87 -132.984,09 D. Manager's fee (-) a) Financial management Classic Shares -483.314,52 -2.244.354,27 Institutional B Shares -2.751.497,22 -108.186,89 b) Administration and accounting management -231.595,93 -170.249,56 E. Administrative expenses (-) -139,77 -92,36 F. Formation and organisation expenses (-) -23.213,36 -108.928,05 G. Remuneration, social security charges and
pension -17,09 -42,79
H. Services and sundry goods (-) -33.897,71 -55.141,96 J. Taxes Classic Shares -39.865,45 -96.470,72 Institutional B Shares -31.579,27 55.879,83 K. Other expenses (-) -142.427,56 -82.271,40
Income and expenditure for the period Subtotal II + III + IV 2.361.325,94 1.516.437,10
V. Profit (loss) on ordinary activities before tax 47.312.505,74 -52.708.647,23
VII. Result for the period 47.312.505,74 -52.708.647,23
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 47.768.598,18 -3.994.283,08 Profit (loss) brought forward from the previous
financial year 50.228.159,82
Profit for the period available for appropriation 47.312.505,74 -52.708.647,23 Income on the creation of shares (income on the
cancellation of shares) 456.092,44 -1.513.795,67
II. (Appropriations to) Deductions from capital -47.734.425,73 4.032.743,55
IV. (Dividends to be paid out) -34.172,45 -38.460,47
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND FINANCE
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND FINANCE (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 118.552.244,38 127.590.585,71 246.142.830,10 Sales 49.323.919,98 61.904.391,29 111.228.311,27 Total 1 167.876.164,36 189.494.977,00 357.371.141,36 Subscriptions 131.278.169,46 165.503.816,63 296.781.986,09 Redemptions 48.713.508,24 100.468.074,97 149.181.583,21 Total 2 179.991.677,70 265.971.891,60 445.963.569,30 Monthly average of total assets
197.175.022,85 266.487.866,04 231.831.444,44
Turnover rate -6,14 % -28,70 % -38,21 %
1st half of year 2nd half of year YearPurchases 118.552.244,38 127.590.585,71 246.142.830,10 Sales 49.323.919,98 61.904.391,29 111.228.311,27 Total 1 167.876.164,36 189.494.977,00 357.371.141,36 Subscriptions 131.278.169,46 165.503.816,63 296.781.986,09 Redemptions 48.713.508,24 100.468.074,97 149.181.583,21 Total 2 179.991.677,70 265.971.891,60 445.963.569,30 Monthly average of total assets
-2.572.295.825,69 304.968.355,85 291.748.758,27
Corrected turnover rate 0,47 % -25,08 % -30,37 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
Capitalization Distribution Capitalization Distribution
2011 - 12 96.230.264,67 7.499.492,44
2012 - 12 265.475.159,49 135.572.518,87
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 94.276.741,70 299,19
2012 - 12 263.889.364,41 383,62
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0166985482 EUR 27.14% 3.59% -5.47% 0.0025 27/03/1998 -1.79%
DIV BE0166984477 EUR 27.20% 3.63% -5.46% 0.0025 27/03/1998 -1.79%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228544779 EUR 27.23% 25/11/2011 37.32%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 1.82 EUR net (2.42 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.673% Classic Shares Capitalization: 1.795% Institutional B Shares Capitalization: 1.646% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 53,349 32,004 59.99%
CSFBSAS 45,419 23,830 52.47%
DEUTSCHE 15,442 8,328 53.93%
EQ CSA MACQUARIE 1,477 834 56.48%
HSBC 8,042 2,359 29.33%
JP MORGAN 7,055 3,919 55.56%
MERRILL 11,344 6,550 57.74%
MORGAN STANLEY 54,317 29,012 53.41%
NOMURA 40,325 17,622 43.70%
SOCGEN 689 337 48.93%
UBSWDR 42,427 24,097 56.80%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 169.001,79 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
BANK OF COMMUNICATIONS CO -H- HKD 399.999 5,840 228.599,94
BARCLAYS PLC GBP 130.000 2,624 420.564,67
CAN IMP BK COMMERCE CAD 8.100 79,970 493.453,95
CAPITALAND LIMITED SGD 186.000 3,700 427.320,71
HANG SENG BANK LTD HKD 17.546 118,700 203.813,62
HENDERSON GROUP PLC GBP 269.721 1,323 439.946,84
INSURANCE AUSTRALIA GROUP LTD AUD 5.077 4,690 18.750,40
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 47.000 EUR 57.424,79
FRANCE 2003 2,25% 25/07/2020 EUR 318.000 EUR 462.706,85
OAT FRANCE 2003 4% 25/04/14 EUR 104.000 EUR 112.290,15
FRANCE 2004 1,60% 25/07/2015 EUR 615.000 EUR 790.276,23
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 212.000 EUR 233.724,06
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 1.170.000 EUR 1.311.000,21
FRANCE - 08/14 3.00% 12/07 EUR 1.753.000 EUR 1.857.324,54
NEDERLAND 2005 4% 15/01/37 EUR 472.000 EUR 646.099,56
Total 7.741.623,21 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Euro Telecom & Technology
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND EURO TELECOM & TECHNOLOGY
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 28 January 2000 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 83.18 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED The assets are invested primarily in shares of European companies in the telecommunication, technology and media sectors.
RISK CONCENTRATION Shares of European companies in the telecommunication, technology and media sectors.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. In Europe the debt crisis continued to rage unabated. Five euro countries needed a bail-out from the European emergency funds. Greece twice reached an agreement during the year with its private sector creditors concerning a rescheduling of its bond debts. Spain came into the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia.
In the EMU real GDP shrank by 0.3% y-o-y. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany fulfilled its traditional role as locomotive of the European economy to a lesser extent than in the recent past. Greater divergence within Europe resulted in a further decline in unemployment in Germany and an alarmingly rapid rise in unemployment in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery. Market performance was consequently dictated in 2012 by volatile sentiment. During the first three months the markets were buoyed by relative economic optimism. After the market eased in April and May, a fine rally was built up from early June onwards, in disregard of the worsening economic signals. On 31 December the MSCI All Countries (the broadest world index) in euros was 14.5% higher than at the end of 2011. Among the traditional markets, Western Europe (MSCI Europe index return for the same period +18.4%) managed to offset some of the underperformance built up since the euro crisis flared up in autumn 2009, despite the continuing influence of certain problem files. Evidently the underperformance of European shares had seen such a valuation gap open up against US shares that new episodes in the euro crisis lacked the same impact on the trading floor. Wall Street closed the year up substantially up on balance (S&P500: +13.4%, Dow Jones: +7.3%), while European investors also benefited from the small increase in value of the dollar (MSCI USA return in euros: +13.9%). The BEL 20 rose by 18.8%, more or less in line with the performance of other European stock markets. The Belgian banking stocks KBC and Ageas did the best, while Solvay and AB InBev, which has taken over the Mexican market leader Modelo, were once again star performers. D’Ieteren, Mobistar and especially Delhaize, which is grappling with structural problems in its two main markets, were the most important underperformers during the period under review.
2.1.8 FUTURE POLICY In Europe the budgetary plans, the banks' tighter lending policy and the high level of uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could therefore see a further contraction in European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified. The crisis has also brought the realisation that economic governance, as it is now called in Eurospeak, needs to be tackled as a matter of urgency. In concrete terms, this involves measures such as supranational supervision of banks, strict monitoring and sanctioning of budgetary policy, monitoring of pay policy and harmonising European taxation. During the coming months the organisation of the ESM (European Stability Mechanism, which came into operation from 1 October 2012) the installation of the pan-European banking supervision within the ECB (to be in place by 1 March 2014) and the implementation of the Fiscal Stability Treaty (in force since 1 January 2013) will continue to demand considerable energy and diplomatic dexterity. No delays can be permitted in this work to set up a new architecture for the EMU. Since it may be argued that money market rates will not rise rapidly and that bond rates are at an historical low, everything would appear to point to equities as the most interesting investment alternative in the coming months. The lack of alternatives is not, of course, sufficient reason to increase the market valuation. For that to happen, investors will need to be more predisposed to taking risk. The present valuation prices in very gloomy scenarios. Based on forecast earnings for 2013, the price/earnings ratio (PE) is 13.5 for the US S&P 500 index and 11.4 for the MSCI Europe. That is 25% and 30% respectively lower than the historical average. Equities are certainly dirt-cheap compared with bonds. The earnings yield – the inverse of the price/earnings ratio – is currently 8.7% for the MSCI Europe, an unprecedented premium of some 740 basis points above German bond yields.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 24.308.244,90 26.635.216,35
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 534.411,29 274.414,43 C. Shares and similar instruments a) Shares 24.545.982,18 26.829.179,28 Of which securities lent 480.301,02 287.503,23 D. Other securities 2.239,20
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 8.049,88 1.280,58 b) Tax assets 12.222,58 7.711,68 B. Payables a) Accounts payable (-) -37.328,22 -48.559,18 c) Borrowings (-) -238.075,35 -247.935,19 d) Collateral (-) -534.411,29 -274.414,43
V. Deposits and cash at bank and in hand A. Demand balances at banks 11.300,97 11.114,59
VI. Accruals and deferrals A. Expense to be carried forward 1.306,00 B. Accrued income 62.793,91 134.251,11 C. Accrued expense (-) -56.701,05 -55.371,72
TOTAL SHAREHOLDERS' EQUITY 24.308.244,90 26.635.216,35
A. Capital 21.990.853,43 25.772.156,07
B. Income equalization -52.888,55 -33.494,58
C. Profit(Loss) carried forward 753.468,33 4.905.818,32
D. Result for the period 1.616.811,69 -4.009.263,46
IX Financial instruments lent 480.301,02 287.503,23
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 471.297,03 -4.330.018,90 D. Other securities -0,04 5.574,44 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 408.463,03 -108.152,17
II. Investment income and expenses A. Dividends 1.150.037,86 1.054.408,67 B. Interests a) Securities and money market instruments 16.038,45 21.504,20 b) Cash at bank and in hand and deposits 94,84 550,65 C. Interest on borrowings (-) -841,30 -1.593,36
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
0,46 18,79
B. Other 851,50
IV. Operating expenses A. Investment transaction and delivery costs (-) -4.183,38 -125.646,11 B. Financial expenses (-) -415,80 -2.847,89 C. Custodian's fee (-) -22.734,01 -26.671,61 D. Manager's fee (-) a) Financial management Classic Shares -346.214,79 -393.033,60 Institutional B Shares -87,69 -7,28 b) Administration and accounting management -24.663,98 -30.423,86 E. Administrative expenses (-) -511,20 -574,58 F. Formation and organisation expenses (-) -2.177,53 -44.276,67 G. Remuneration, social security charges and
pension -6,73
H. Services and sundry goods (-) -5.081,56 301,21 J. Taxes Classic Shares -20.365,74 -21.634,36 Institutional B Shares -0,61 -0,54 K. Other expenses (-) -1.842,35 -7.585,26
Income and expenditure for the period Subtotal II + III + IV 737.051,67 423.333,17
V. Profit (loss) on ordinary activities before tax 1.616.811,69 -4.009.263,46
VII. Result for the period 1.616.811,69 -4.009.263,46
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 2.317.391,47 863.060,28 Profit (loss) brought forward from the previous
financial year 753.468,33 4.905.818,32
Profit for the period available for appropriation 1.616.811,69 -4.009.263,46 Income on the creation of shares (income on the
cancellation of shares) -52.888,55 -33.494,58
II. (Appropriations to) Deductions from capital -2.166.786,05
III. Profit (loss) to be carried forward 753.468,33
IV. (Dividends to be paid out) -150.605,42 -109.591,95
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND EURO TELECOM & TECHNOLOGY
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Austria
TELEKOM AUSTRIA AG (WIEN) 10.286,00 EUR 5,740 59.041,64 0,24 0,24
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND EURO TELECOM &
TECHNOLOGY (IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 220.744,88 2.612,40 223.357,28 Sales 1.820.446,05 1.571.708,99 3.392.155,04 Total 1 2.041.190,93 1.574.321,39 3.615.512,32 Subscriptions 195.299,79 246.849,34 442.149,13 Redemptions 2.445.179,20 1.785.995,46 4.231.174,66 Total 2 2.640.478,99 2.032.844,80 4.673.323,79 Monthly average of total assets
25.268.153,01 24.826.700,08 25.042.921,92
Turnover rate -2,37 % -1,85 % -4,22 %
1st half of year 2nd half of year YearPurchases 220.744,88 2.612,40 223.357,28 Sales 1.820.446,05 1.571.708,99 3.392.155,04 Total 1 2.041.190,93 1.574.321,39 3.615.512,32 Subscriptions 195.299,79 246.849,34 442.149,13 Redemptions 2.445.179,20 1.785.995,46 4.231.174,66 Total 2 2.640.478,99 2.032.844,80 4.673.323,79 Monthly average of total assets
24.371.210,21 24.019.036,46 24.222.840,97
Corrected turnover rate -2,46 % -1,91 % -4,37 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 534.411,29 534.411,29 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 6.265,44 0,00
2012 - 12 0,00 549,62
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 6.430,76 89,32
2012 - 12 6.295,16 95,38
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0173086381 EUR 6.41% 2.36% -7.26% 0.0365 28/01/2000 -12.05%
DIV BE0173085375 EUR 6.40% 2.36% -7.26% 0.0364 28/01/2000 -12.05%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228929749 EUR 6.47% 24/11/2011 5.26%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 1.85 EUR net (2.47 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.707% Classic Shares Capitalization: 1.702% Institutional B Shares Capitalization: 1.604% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CSFBSAS 373 181 48.43%
MORGAN STANLEY 906 512 56.56%
NOMURA 286 149 52.25%
UBSWDR 249 138 55.55%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 8.361,38 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ALCATEL-LUCENT EUR 33.309 1,003 33.408,93
NOKIA CORP -A- EUR 138.733 2,926 405.932,76
TELE2 -B- SEK 3.000 117,100 40.959,33
Total 480.301,02
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 4.000 EUR 4.887,22
FRANCE 2003 2,25% 25/07/2020 EUR 96.000 EUR 139.685,09
OAT FRANCE 2003 4% 25/04/14 EUR 23.000 EUR 24.833,40
FRANCE 2004 1,60% 25/07/2015 EUR 109.000 EUR 140.065,22
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 202.000 EUR 222.699,34
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 2.000 EUR 2.241,03
Total 534.411,30 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Euro Finance
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND EURO FINANCE
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 31 May 2000 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 194.92 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED
At least 75% of the assets are invested in shares of European companies in the financial sector.
RISK CONCENTRATION European financial sector shares.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate throughout 2012. The debt crisis in Europe continued to rage unabated. Five euro countries requested a bailout from the European emergency fund. Greece reached agreements with its private sector creditors on two occasions in the span of one year on restructuring the bond debt it owes them. Spain found itself in the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the existence of the euro was not at issue.
A new feature of this crisis compared to previous ones is that government paper, which had previously been seen as entirely risk-free, also started to be tainted with a degree of credit risk. What started as an isolated problem on the periphery of the euro area developed into an issue concerning the credibility of the monetary union and its institutions. In autumn 2009 – three years ago already – it became clear that Greece's official statistics had painted a highly flattering picture of its public finances; as a result, bond investors lost confidence and many refused to continue to fund Greece. After Greece had elaborated its own bailout programme (April 2010), it rapidly became clear that the EMU needed a structured bailout framework. This initially took the form of the European Financial Stability Facility (EFSF, May 2010) and from 1 October 2012 the permanent European Stability Mechanism (ESM), a fully-fledged supranational institution with its own legal personality. The Greek debacle and lack of political consensus on a blueprint for a renewed currency union continued to fuel mistrust among bond investors. Ireland (November 2010), Portugal (April 2011), once again Greece (July 2011), Cyprus (June 2012) and Spain (with the bailout fund for the banks in June 2012) had to concede that they were no longer able to raise funds in the market and took shelter under the European umbrella. The support of Europe (and the IMF) is dependent on strict austerity policies, which are periodically reviewed. The Greek government's first, rather draconian, austerity plan was not stringent enough and came up against much political opposition. The period July 2011 – May 2012 was one of complete political chaos. In March 2012 agreement on debt restructuring was concluded with private bondholders, under which Greece was able to eliminate more than 100 billion euros in debt. In December 2012 the European partners relaxed the interest and repayment terms on bailout fund loans to Greece. As a result of all these operations Greece's debt ratio remained sky-high (190% of GDP at the end of 2012), but the financing burden has become appreciably more realistic and there has been a marked change in bond ownership patterns: over 80% of Greek debt is now held by the public sector (European governments, central banks and the IMF). Speculation concerning the Greek exit from the EMU has dried up. In the course of 2012 the markets shifted their attention from Greece to Spain. The Spanish government has already drawn on the EFSF for the recapitalisation of its banks. In the meantime other problems are also attracting attention: the recession is deeper than had been thought, the austerity policy was already revised as many as four times in the course of 2012 and regional finances are seriously dislocated. In a lengthy address on 3 August, Prime Minister Mariano Rajoy once again emphasised the severity of the situation and drew the attention of the Spanish people to their responsibilities, while also not ruling out immediate co-operation with the EFSF. By the end of the period under review, no formal application for aid had, however, been filed. As traditionally faithful investors in government bonds, the European banks, which had seen their capital base seriously eroded in the 2008/09 credit crisis, were oversensitive to the consequences of the euro crisis and the write-downs on their bond portfolios. The euro crisis could therefore easily end up as a systemic crisis. Avoiding this provided the driver for the European Central Bank (ECB) to intervene actively, especially by buying Spanish and Italian government paper. After Draghi took over from Trichet at the ECB, the heavy artillery was brought in. In December 2011 and in February 2012, two LTRO programmes were launched under which banks were able to borrow on extremely favourable conditions for a term of 36 months. Funds totalling 1 000 billion euros were borrowed, to be invested primarily in Spanish and Italian bonds. In September the ECB introduced its bazooka in the form of Outright Monetary Transactions (OMT). The ECB expressed its willingness to buy up troubled government debt with maturities of up to three years for an unlimited period and in unlimited quantities, provided a number of conditions have been met. The most important of these is that the government in question submits a formal request for a bailout under the ESM. For this reason the OMT programme has so far been unable to start up. The financial markets have not been disturbed by this. For them the setting up of the European bazooka was enough in itself to regard the euro crisis as having been definitively averted. Increasing doubts about the economy and the ongoing euro crisis have pushed US and German bond rates down since March 2011. This trend was sustained in 2012. On 1 June, the US and German ten-year rates hit lows of 1.45% and 1.15%, respectively. Despite the difficulties referred to above, Financials were among the best-performing sectors. The outperformance of the Banks is no doubt associated with the quantitative easing programmes undertaken by the central banks. The announcement of OMT by the ECB eased the pressure of the euro crisis.
2.1.8 FUTURE POLICY We expect that in Europe budgetary plans, tighter lending policy of the banks and major uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could therefore see a contraction of European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified. However, time is of the essence for the euro area. Everyone knows that the EMU is not a perfect monetary union. In its twelve-year history, little has been done to improve its internal operation. National autonomy was off-limits. The crisis brought the realisation that economic governance, as it is now called in Eurospeak, needs to be tackled as a matter of urgency. In concrete terms, this involves measures such as supranational supervision of banks, strict monitoring and sanctioning of budgetary policy, monitoring of pay policy and harmonising European taxation. In the coming months the organisation of the ESM (European Stability Mechanism, which came into operation on 1 October 2012), the installation of the pan-European banking supervision within the ECB (to be in place by 1 March 2014) and the implementation of the Fiscal Stability Treaty (in force since 1 January 2013) will continue to demand considerable energy and diplomatic dexterity. Work on a new architecture for the EMU cannot be postponed, even though the European leaders are having to turn their attention from one emergency to another, which is not conducive to a calm climate for negotiations. The capital base of banks will need to be strengthened further to ensure the stability of the financial system, so that there is a sufficient buffer for reserves and to offset unforeseen write-downs. That will be just as important in 2013 – and probably after that too – as it was in 2011 or 2012. All the measures required to achieve this are being taken. Examples include the almost 2 000 billion euros that were set aside in the space of two years in order to ensure the smooth funding of European governments, the introduction of stress tests to establish whether the banks have sufficient capital to cope with a new and serious crisis, the gradual introduction of new and/or stricter capital requirements under Basel III and making the reserves of the ESM available for direct loans to ailing European banks. There is a chance that volatility might return to the financial sector. We will therefore compose the fund’s defensive aspect by investing within the insurance sector in reinsurers and non-life insurers. We anticipate positive returns – also after the recent rally – in the medium term if financial service providers manage to record a somewhat more normal return on equity, and if European policymakers can finally achieve lasting solutions in terms of reorganising public-sector finances.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 22.302.381,48 17.207.831,10
II. Securities, money market instruments, UCIs and derivatives
C. Shares and similar instruments a) Shares 21.742.866,49 16.924.185,96 D. Other securities 0,02 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -1.524,41
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 25.829,52 2.896,47 b) Tax assets 7.005,18 7.947,02 B. Payables a) Accounts payable (-) -30.610,17 -16.835,02
V. Deposits and cash at bank and in hand A. Demand balances at banks 578.371,16 273.953,19
VI. Accruals and deferrals A. Expense to be carried forward 2.214,02 B. Accrued income 10.444,07 38.441,06 C. Accrued expense (-) -31.524,79 -23.447,19
TOTAL SHAREHOLDERS' EQUITY 22.302.381,48 17.207.831,10
A. Capital 10.895.640,08 11.583.019,52
B. Income equalization -2.485,35 -54.462,51
C. Profit(Loss) carried forward 5.573.595,08 10.590.127,33
D. Result for the period 5.835.631,67 -4.910.853,24
Off-balance-sheet headings
III Notional amounts of futures and forward contracts
III.B Written futures and forward contracts -77.436,36
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 5.243.297,36 -5.230.842,29 D. Other securities -15.953,99 -56.838,18 F. Derivative financial instruments l) Financial indices Option contracts 4.200,00 Futures and forward contracts 78.675,00 152.924,97 H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts 1.524,41 -1.524,41 b) Other foreign exchange positions and
transactions 326.470,68 -94.640,50
II. Investment income and expenses A. Dividends 546.829,37 841.470,05 B. Interests a) Securities and money market instruments -2.076,13 39.966,40 b) Cash at bank and in hand and deposits 3.972,85 3.677,68 C. Interest on borrowings (-) -195,00 -6.950,27
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
1.293,93 34,92
B. Other 1.669,62
IV. Operating expenses A. Investment transaction and delivery costs (-) -19.145,59 -46.209,38 B. Financial expenses (-) -253,82 -1.789,26 C. Custodian's fee (-) -15.734,62 -44.432,81 D. Manager's fee (-) a) Financial management Classic Shares -267.917,36 -413.072,90 Institutional B Shares -2.031,48 -1.122,14 b) Administration and accounting management -19.188,84 -22.565,58 E. Administrative expenses (-) -185,25 -207,08 F. Formation and organisation expenses (-) -1.577,98 -3.002,58 G. Remuneration, social security charges and
pension -5,04
H. Services and sundry goods (-) -3.977,12 -6.624,27 J. Taxes Classic Shares -17.925,69 -15.274,68 Institutional B Shares -103,15 639,40 K. Other expenses (-) -4.365,91 -6.134,91
Income and expenditure for the period Subtotal II + III + IV 197.418,21 320.067,17
V. Profit (loss) on ordinary activities before tax 5.835.631,67 -4.910.853,24
VII. Result for the period 5.835.631,67 -4.910.853,24
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 11.406.741,40 5.624.811,58 Profit (loss) brought forward from the previous
financial year 5.573.595,08 10.590.127,33
Profit for the period available for appropriation 5.835.631,67 -4.910.853,24 Income on the creation of shares (income on the
cancellation of shares) -2.485,35 -54.462,51
II. (Appropriations to) Deductions from capital -11.370.337,63
III. Profit (loss) to be carried forward 5.573.595,08
IV. (Dividends to be paid out) -36.403,77 -51.216,50
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND EURO FINANCE
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Austria
VIENNA INSURANCE GROUP - 2.000,00 EUR 40,375 80.750,00 0,37 0,36
Belgium
AGEAS NV (BRU) B STRIP-VVPR 2.666,00 EUR 0,001 2,67
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND EURO FINANCE (IN
THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 2.755.586,58 1.612.767,34 4.368.353,91 Sales 3.422.783,49 1.885.918,96 5.308.702,45 Total 1 6.178.370,07 3.498.686,29 9.677.056,36 Subscriptions 3.078.511,83 2.559.595,70 5.638.107,53 Redemptions 3.755.071,28 2.569.295,90 6.324.367,18 Total 2 6.833.583,11 5.128.891,60 11.962.474,71 Monthly average of total assets
18.757.598,57 20.209.881,91 19.498.559,45
Turnover rate -3,49 % -8,07 % -11,72 %
1st half of year 2nd half of year YearPurchases 2.755.586,58 1.612.767,34 4.368.353,91 Sales 3.422.783,49 1.885.918,96 5.308.702,45 Total 1 6.178.370,07 3.498.686,29 9.677.056,36 Subscriptions 3.078.511,83 2.559.595,70 5.638.107,53 Redemptions 3.755.071,28 2.569.295,90 6.324.367,18 Total 2 6.833.583,11 5.128.891,60 11.962.474,71 Monthly average of total assets
23.325.490,92 21.385.351,00 21.870.032,03
Corrected turnover rate -2,81 % -7,62 % -10,45 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS Nil
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 1.047.111,70 18.703,67
2012 - 12 20.240,64 1.243.324,52
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 1.043.486,80 218,53
2012 - 12 0,00 0,00
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0174093758 EUR 33.89% -2.46% -10.56% -0.0001 31/05/2000 -4.17%
DIV BE0174092743 EUR 33.85% -2.50% -10.59% -0.0004 31/05/2000 -4.19%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
The cumulative returns are shown where they relate to a period of at least one year. Classic Shares
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Dividend on ex-dividend date 28/03/2013: 1.54 EUR net (2.05 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.763% Classic Shares Capitalization: 1.758% Institutional B Shares Capitalization: 0.22% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 312 144 46.06%
CSFBSAS 1,620 803 49.59%
DEUTSCHE 396 205 51.60%
EQ CSA MACQUARIE 30 15 50.01%
HSBC 546 184 33.75%
MORGAN STANLEY 675 347 51.48%
NOMURA 255 126 49.56%
UBSWDR 2,263 1,150 50.84%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to -1.409,85 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Global Leaders
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND GLOBAL LEADERS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 1 September 2000 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 223.71 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in a global selection of shares issued by large cap multinationals. The emphasis is on: multinational character, consolidation, market leader and extensive global presence.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR The fund invests in a global portfolio of multinational companies that are characterised by their market leadership and global presence. The universe consists of firms that earn revenue from foreign trade, thus benefiting from international diversification and greater exposure to markets. Equity markets moved considerably higher at the start of 2012. The Fed’s announcement that rates will remain low until at least late 2014, record results from Apple and positive US GDP growth numbers were the key support factors for equity markets. It was not all good news however, as major French banks were downgraded and concerns about the Greek ‘private’ debt restructuring continued to prevail. Into February and after a short pause, markets climbed higher again in the second half of the month. Regionally, the euro area markets strongly outperformed with investors becoming convinced that after two years of crisis, the region has succeeded in isolating the Greek question. The risks of severe damage to the European economy as a whole and for the financial sector in particular fell sharply. Towards the end of the first quarter, positive macroeconomic developments, especially in the US, the successful Greek debt restructuring and the liquidity injection by central banks drove equity markets modestly higher in March. Towards the end of the month, investors’ optimism was tempered by worries over the risks for a hard landing in China and the rise in government bond yields throughout the world. The beginning of the second quarter saw a global pullback on equity markets, prompted by a slowdown in Chinese growth to its lowest level since Q2 2009, poor EU and US economic data and confirmation that the UK and Spain had slide back into recession. The European debt crisis flared up again as yields surged on Spanish bonds, the Dutch government resigned and Presidential Election in France lead to much political uncertainty. Euro area concerns escalated in May as Greek exit fears rose after elections in the country produced a stalemate and the country was unable to form a government. Statements from various European officials alluding to the fact that an exit scenario had been discussed sent markets into a tailspin. Sentiment was further hit when periphery yields spiked after Spain partially nationalized Bankia, Spain’s second largest mortgage lender. As the end of the second quarter approached, equity markets surged on the final trading day of the June after unexpected policy responses from the EU Summit, involving an agreement to use the ESM to recapitalise banks directly and take steps towards banking union soothed market nerves and increased appetite for risk assets. Victory for the pro-EU/Bailout New Democrats in Greece also supported markets. Into the second half of the year main market developments for the quarter saw Central Banks around the world implementing a new round of monetary easing in July to avoid a slide into a fresh recession. The ECB cut each of its key rates by 25 bps, bringing the main refi rate to 0.75% - a record low and the deposit rate to 0%. Later in the month, Draghi’s comments that the “Euro is irreversible” and that the ECB will do whatever it takes to preserve the currency sparked a month-end rally in stocks globally. In the UK, the Bank of England implemented an additional GBP 50 billion of QE while in China, the PBOC cut deposit and lending rates to 3% and 6% respectively. The equity rally ran out of steam in August amid holiday season in Europe and the U.S, with little news or market developments to influence sentiment. In the US, unemployment figures continued to worsen. The Fed’s chief Bernanke hinted that the Fed was willing to provide additional policy stimulus in the near term in order to ‘promote a stronger economic recovery and sustained improvement in labour market conditions’. Overall data releases from China were weak with declining exports, industrial production and manufacturing figures. Global markets had a positive month towards quarter-end buoyed by the ECB decision to allow unlimited purchasing of short-dated bonds (under the Outright Monetary Transactions operation), of countries who have entered fiscal adjustment programmes. Following this, the German court’s decision to back the EU bailout and the announcement from the Fed that it was introducing QE3 boosted investor confidence and lead markets to rally. Into the final quarter of the year and main market developments saw consumer spending, confidence and housing indicators in the U.S remain largely positive, while in Europe the ECB left its main interest rate unchanged at 0.75%. Towards quarter-end the FOMC expanded QE in the US, by adding at additional $45 billion per month of open-ended Treasury security purchases, while the fiscal cliff has been averted by a last minute deal, but with no agreement on the debt ceiling it is likely that this issue will return in the near future. The EU approved the disbursement of the next tranche of Greek aid. The region’s stock markets were buoyed towards the end of the quarter as perceptions grew that the debt crisis had stabilized somewhat.
In terms of the performance of KBC Equity Fund Global Leaders, the first quarter was relatively robust. A rally started in early January and was sustained to quarter end, with the fund gaining in performance terms over the period, slightly ahead of the broad market. The outperformance was mainly due to stock selection within the fund, with positive contributions coming most notably from within the pharmaceuticals and software segments. Overall, the top contributors over the first quarter were Waters Corp, Qualcomm Inc, Citigroup and HSBC. The second quarter however was more volatile and the fund lagged the broad market each month. Stock selection was again the main contributor, albeit in negative terms this time. The holdings in the transportation and technology segments weighed most negatively on performance, due to the lack of exposure to Apple and the overweight position in Qualcomm. Within the transportation group, Expeditors International of Washington plunged during the period, after preliminary results for the first quarter showed earnings below analysts’ expectations, thus disappointing investors. While the fund performed positively in absolute terms over the third quarter, KBC Equity Fund Global Leaders continued to lag the benchmark during this period. Stock selection was again the main driver of the performance similar to the previous quarter. In particular, positions in the capital goods and utilities group weighed negatively on performance over the period. Within the utilities sector, AES Corp was among the main negative contributors to performance, after the power producer reported that 2012 profit would be at the lower end of guidance. On the positive side, the software and service group helped offset some of these losses with Microsoft and SAP both among the top contributors to performance over the period. During the fourth quarter, the fund moved relatively in-line with the benchmark, with the fund ending the quarter with a slight negative performance relative to the benchmark. The best performing sector was information technology, largely down to the fund’s underweight position in Apple, which suffered a large decline in the period. The energy sector, followed by the consumer staples sector were the main underperformers for the fund during the quarter. Within the energy sector, underperformance was driven mainly by the fund’s overweight position in National Oilwell Varco, which declined after the company forecasted a drop in margin in the fourth quarter at its petroleum services and supplies units which is its second largest unit. Within consumer staples, the share price of Philip Morris suffered, after EU regulators proposed stricter tobacco regulation to curb smoking in Europe. While KBC Equity Fund Global Leaders performed positively in absolute terms over the year, it was overall a disappointing year for the fund in relative terms with the fund underperforming the broad market in 2012.
2.1.8 FUTURE POLICY While we expect global growth to be positive looking forward into 2013, developed markets are being highlighted as the point of weakness with only modest expansion expected. We expect positive, albeit modest growth in the US over the coming quarters, with the gradual upturn of the US housing market and a cautious decline in the rate of unemployment. The ongoing fiscal crisis in the Eurozone is expected to continue its negative influence on growth. Despite the European Central Bank’s efforts to control and address the crisis, Europe remains in an unstable condition. Economic releases for the Eurozone countries are not supportive with overall GDP figures expected to contract in the first half of 2013, with no type of recovery expected until at least the second half of the year. A second cause of concern is the fiscal restructuring as a result of the credit crisis that remains, almost 5 years on, for both the US and Eurozone. The fiscal austerity that is being forced upon consumers is making stable domestic growth for many countries virtually impossible. While a political crisis has been averted in the US after a last minute agreement regarding the fiscal cliff, this may only be a short term solution in advance of the debt ceiling debate to follow in February. In the emerging markets, the scenario is different with economic growth expected to continue in 2013. The strongest growth dynamic is to be found in emerging Asia. While growth is expected to continue in China, as confirmed by sustained improvement in confidence indicators, it may be more modest than in previous years, as policy makers in China as well as the rest of Asia continue to focus on inflationary pressure. In line with the theme, KBC Equity Fund Global Leaders will continue to invest in a global portfolio of multinational companies that are characterised by their market leadership and global presence. We will continue to ensure that the portfolio is diversified, with sector and regional allocation in line with the MSCI World All Countries Index.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 47.814.222,17 91.992.622,04
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 773.265,91 2.607.154,54 C. Shares and similar instruments a) Shares 47.702.121,80 91.233.895,36 Of which securities lent 717.886,18 2.780.195,97 D. Other securities 3.139,17 7.073,66 E. Open-end undertakings for collective investment 135.856,76
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 292.279,75 15.986,16 b) Tax assets 6.214,22 12.686,79 B. Payables a) Accounts payable (-) -35.399,09 -384.846,36 c) Borrowings (-) -222.031,06 d) Collateral (-) -773.265,91 -2.607.154,54
V. Deposits and cash at bank and in hand A. Demand balances at banks 103.050,89 983.558,51
VI. Accruals and deferrals A. Expense to be carried forward 5.191,22 B. Accrued income 56.559,67 141.663,18 C. Accrued expense (-) -91.713,18 -158.443,24
TOTAL SHAREHOLDERS' EQUITY 47.814.222,17 91.992.622,04
A. Capital 25.381.827,70 78.124.765,86
B. Income equalization -446.773,64 -525.425,43
C. Profit(Loss) carried forward 13.803.703,63 33.499.877,09
D. Result for the period 9.075.464,48 -19.106.595,48
IX Financial instruments lent 717.886,18 2.780.195,97
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 6.767.367,16 -19.285.526,61 D. Other securities -15.318,43 -116.721,17 E. Open-end undertakings for collective investment 15.517,16 -419.078,31 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 1.462.021,74 195.029,51
II. Investment income and expenses A. Dividends 2.305.773,80 2.940.537,95 B. Interests a) Securities and money market instruments 73.883,44 81.366,19 b) Cash at bank and in hand and deposits 8.166,90 28.416,94 C. Interest on borrowings (-) -6.694,55 -6.457,28
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
327.639,35 19.134,89
B. Other 6.911,77
IV. Operating expenses A. Investment transaction and delivery costs (-) -325.034,04 -359.367,47 B. Financial expenses (-) -1.364,29 -3.050,14 C. Custodian's fee (-) -77.879,83 -127.677,97 D. Manager's fee (-) a) Financial management Classic Shares -607.308,02 -1.728.121,17 Institutional B Shares -660.599,99 -55.051,96 b) Administration and accounting management -91.554,07 -123.093,60 E. Administrative expenses (-) -176,07 -186,84 F. Formation and organisation expenses (-) -8.280,06 -13.840,33 G. Remuneration, social security charges and
pension -10,22 -33,61
H. Services and sundry goods (-) -18.847,90 -27.411,06 J. Taxes Classic Shares -31.905,81 -71.456,76 Institutional B Shares -1.415,80 24.960,20 K. Other expenses (-) -38.515,99 -65.878,65
Income and expenditure for the period Subtotal II + III + IV 845.876,85 519.701,10
V. Profit (loss) on ordinary activities before tax 9.075.464,48 -19.106.595,48
VII. Result for the period 9.075.464,48 -19.106.595,48
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 22.432.394,47 13.867.856,18 Profit (loss) brought forward from the previous
financial year 13.803.703,63 33.499.877,09
Profit for the period available for appropriation 9.075.464,48 -19.106.595,48 Income on the creation of shares (income on the
cancellation of shares) -446.773,64 -525.425,43
II. (Appropriations to) Deductions from capital -22.364.235,68
III. Profit (loss) to be carried forward 13.803.703,63
IV. (Dividends to be paid out) -68.158,79 -64.152,55
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND GLOBAL LEADERS
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND GLOBAL LEADERS
(IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 79.386.936,28 23.085.007,32 102.471.943,60 Sales 90.322.844,40 64.775.472,17 155.098.316,57 Total 1 169.709.780,68 87.860.479,49 257.570.260,17 Subscriptions 62.299.565,42 24.842.710,19 87.142.275,61 Redemptions 73.567.456,08 66.069.396,53 139.636.852,61 Total 2 135.867.021,50 90.912.106,72 226.779.128,22 Monthly average of total assets
122.599.819,87 63.394.019,81 92.996.919,84
Turnover rate 27,60 % -4,81 % 33,11 %
1st half of year 2nd half of year YearPurchases 79.386.936,28 23.085.007,32 102.471.943,60 Sales 90.322.844,40 64.775.472,17 155.098.316,57 Total 1 169.709.780,68 87.860.479,49 257.570.260,17 Subscriptions 62.299.565,42 24.842.710,19 87.142.275,61 Redemptions 73.567.456,08 66.069.396,53 139.636.852,61 Total 2 135.867.021,50 90.912.106,72 226.779.128,22 Monthly average of total assets
121.222.004,37 67.633.582,23 91.335.820,93
Corrected turnover rate 27,92 % -4,51 % 33,71 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 773.265,91 773.265,91 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 48.204.259,12 1.939.856,83
2012 - 12 81.058.750,67 125.990.547,01
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 48.581.736,85 243,63
2012 - 12 7.972.051,12 271,28
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0174807132 EUR 10.16% 6.32% -1.05% 0.0192 01/09/2000 -4.93%
DIV BE0174806126 EUR 10.14% 6.34% -1.04% 0.0191 01/09/2000 -4.93%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228546790 EUR 10.23% 25/11/2011 18.06%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 1.39 EUR net (1.85 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.706% Classic Shares Capitalization: 1.709% Institutional B Shares Capitalization: 1.627% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 59,232 35,550 60.02%
CSFBSAS 4,676 2,910 62.22%
EQ CSA MACQUARIE 3,645 2,107 57.82%
MERRILL 28,461 16,391 57.59%
MORGAN STANLEY 977 628 64.28%
NOMURA 37,385 20,835 55.73%
UBSWDR 57,888 36,487 63.03%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 74.850,79 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
CHINA COSCO HOLDINGS CO. LTD -H- HKD 191.500 3,800 71.212,58
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 138.000 EUR 168.608,95
FRANCE 2003 2,25% 25/07/2020 EUR 5.000 EUR 7.275,26
OAT FRANCE 2003 4% 25/04/14 EUR 32.000 EUR 34.550,82
FRANCE 2004 1,60% 25/07/2015 EUR 438.000 EUR 562.830,88
Total 773.265,91 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Oil
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND OIL
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 29 September 2000 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 574.29 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of companies operating in the oil sector, including companies involved in extracting or refining crude oil or natural gas, or companies involved in the distribution of these products or derivatives thereof.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR The price of oil has continued to fluctuate sideways since 2011, with the customary volatility. The average price price of Brent oil amounted in 2012 to no less than 112 USD – a record and slightly higher than last year, when the average price was 111 USD. The Middle East remained turbulent. In 2012 the confrontation between the West and Iran assumed the proportions of an economic war. Europe announced a boycott in January of Iraninan oil exports. This became effective on 1 July and was supplemented by a freeze on Iranian financial assets in the US. As a result the oil price rose in March to 125 USD. The consumer was however confronted by an economy that was weakening on major concerns surrounding the financial euro crisis and fears of a stagnation of economic growth in China. The oil price consequently eased to 92 USD. This trough in the price gave the economy a limited breathing space, in addition to which bailout plans for the Greek debt were worked out, whereupon the oil price recovered to approximately 110 USD.
The marked decline in the gas price in North America was sustained in 2012. The Henry Hub gas price peaked in 2008 at over 10 USD, but fluctuated in 2012 between 3 USD and 4 USD as a result of the continuous supply of gas from American shale drilling. It consequently became less interesting for oil companies to exploit deposits with a high gas content. This resulted in a shift to oil-rich shale fields, where gas is also obtained as a byproduct. The cheap gas is used by US businesses and households, while the coal that goes unused as a result is exported to Europe. Despite the cold winter in early 2012, this resulted in less demand for gas in Europe. The global LNG (liquid gas) market remained very tight. The oil sector performed less well than the equity market in general. Apart from the weak economic fundamentals, 2012 was characterised by negative company-specific factors among firms with a large market capitalisation. Examples include Repsol, which saw a significant proportion of its assets expropriated, lower production forecasts at BG, ongoing lack of clarity for BP over the Macondo claims, the Elgin platform gas leak in the case of Total, and the sale by ENI of its holding in GALP. In general terms the oil service companies performed better than the integrated players. This applied in particular to the European players. Also notable were the unexpectedly strong margins in the European refinery sector due to the temporary closedown of refineries and to efficiency improvements. As a result of the large-scale supply of cheap shale oil, US refining players have also been able to benefit and to record handsome margins. The fund was overweight in oil services at the expense of the integrated oil companies. Oil service companies active in Brazil and Africa were overweighted, while the oil companies with heavy exposure to the low gas prices were underweighted. Within the refining sector the preference was for US players as these are operating at higher margins.
2.1.8 FUTURE POLICY We believe that 2012 brought to an end an era in which oil prices had been rising for many years. We expect oil prices to come under pressure in the coming years. On the one hand we anticipate no more than a limited increase in demand, driven primarily by the expected economic recovery in the US and China. Since production will also continue to increase, the impact on the oil price will in our view remain limited. Production increases will be seen particularly in Iraq, the US and certain other non-OPEC countries. The situation in the oil market has undergone a total facelift in recent years. The US recorded its largest single-year growth in oil production since 1859 – an increase that threatens to produce a revolution in the oil market. No-one had dared suspect that the picture could change so rapidly. The boost was provided by the new technology of hydraulic drilling. In particular, the extraction of gas from shale deposits has taken off massively in the US in recent years. The fracking process involves pumping water into shale rock at high pressure, thereby as it were squeezing out the fossil fuels. These techniques are now also finding their way to the oil market. Following the American shale gas boom, we may therefore now also anticipate a shale oil boom. The IEA (the International Energy Agency) has calculated that given the present stocks, the US could be the world’s biggest oil producer in five years' time. Matters will not of course proceed so quickly, but we do expect production to rise sharply in the coming years. After a year’s overproduction, worldwide oil stocks rose substantially in 2012. This year we are expecting OPEC's reserve capacity to rise in comparison with 2012. Last year the oil market had to contend with an unparalleled number of unexpected production problems in Yemen, Norway and Brazil, etc., leading to a drop in production of one million barrels per day. If anything, we are expecting a normalisation in 2013. This, in combination with our expectation of rising production and a slight easing of geopolitical tensions, should lead to a lower risk premium on the Brent oil price in the course of 2013. By historical standards the reserve capacity will remain low, so that in the short term, oil prices will remain highly vulnerable to geopolitical tensions. We are however expecting oil prices to remain around the 100 USD mark. Since Saudi Arabia – the only oil producer capable of influencing the price – is happy with the present price of oil, it is likely to cut its production in order to support prices in the event of any correction. At 100 USD the fiscal budgets of most oil-exporting countries are covered, with the exception of Iran, which is grappling with the impact of the sanctions. The budgets have risen substantially in recent years – since the start of the Arab spring – as a result of investments in social provisions such as healthcare and education. For consumers 100 USD is acceptable since this does not impede economic growth and inflationary pressures are limited.
We expect the Henry Hub natural gas price to rise slightly in 2013 in response to falling supply. As a result of the low gas prices it became less interesting last year for oil and gas companies to tap deposits with a high gas content. Much will of course depend on the weather. If we have another mild winter, stocks will remain at very high levels, which will continue to weigh on US gas prices. We are however expecting European gas prices to rise next year. The weak economic growth and warm winter have kept down the demand for gas in Europe, which has in turn weighed on prices. On the other hand, however, the gas fields in the UK and Norway are running out and LNG imports are falling since the prices in Asia are far more attractive. The LNG market remains extremely tight and we are expecting prices to remain very high. In 2013 we will be sticking with our underweight position in the integrated oil companies. We are expecting 2013 to see a repetition of 2012. We fear that the oil giants will once again faced rising costs, higher investment expenditure and weak production growth in 2013. On top of that we are anticipating a further fall in profitability. We will accordingly continue to underweight oil and gas companies with heavy exposure to the low gas prices. Since we are anticipating a slight recovery for US gas, we have however reduced the underweighting. A number of gas companies that were marked down too heavily last year have been re-added the portfolio. We are continuing to overweight oil services. The price of oil determines future investments in new oil fields and at the present price most projects are profitable. In the medium term it will remain a major challenge for the supply to continue matching the rise in demand, but in contrast to 2012 we are now opting resolutely in favour of American oil service companies. Following the strong performance by the European oil services sector, expectations have risen sharply. Another important theme that we will continue to play this year is that of shale oil. Since we expect production from shale rock to rise exponentially in the coming years, companies that have built up strong positions in the various shale oil fields represent very attractive growth stories. In our view the market continues to underestimate the impact of the ever-improving drilling techniques and associated reduction in costs. Indirectly too US refining companies are continuing to benefit from the large supplies of cheap shale oil. The US refining companies will once again be generating very strong cash flows next year and we see further scope for dividend increases or share buybacks. The European refining sector remains sickly and we took advantage of the rally last year in order to underweight this segment. Another structural theme in which we remain engaged is that of LNG. In the coming years very little new capacity will be coming on stream on the supply side, while demand will continue to grow strongly, especially in Asia. It is not, however, all moonshine and roses in this segment. We remain selective. In Australia the construction costs of LNG export terminals are rising exponentially, thereby squeezing the return on certain projects. Companies in line to suffer in this way will be underweighted. Our clear preference is for oil and gas companies that are well positioned on the global cost curve. Another theme in which we are continuing to invest is E&P (exploration and production) companies. These companies prospect for oil and gas fields on the basis of seismological data interpreted by their geologists. Potential finds create a great deal of shareholder value. In order to spread the risks our preference is to invest in a basket, as these companies have a particularly high risk-profile. Exploration hotshots for 2013 remain the Barents Sea, East Africa , Angola, Gabon and the Gulf of Mexico.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 90.890.090,56 123.331.621,53
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 2.060.919,50 3.084.324,40 C. Shares and similar instruments a) Shares 85.978.654,87 123.045.702,53 Of which securities lent 1.152.754,85 3.809.426,35 D. Other securities 91.982,36
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 174.839,88 95.361,45 B. Payables a) Accounts payable (-) -75.966,30 -184.903,08 c) Borrowings (-) -9,14 -26.489,05 d) Collateral (-) -2.060.919,50 -3.084.324,40
V. Deposits and cash at bank and in hand A. Demand balances at banks 4.801.572,80 540.486,99
VI. Accruals and deferrals A. Expense to be carried forward 5.310,98 B. Accrued income 67.419,09 93.195,11 C. Accrued expense (-) -148.403,00 -237.043,40
TOTAL SHAREHOLDERS' EQUITY 90.890.090,56 123.331.621,53
A. Capital 79.006.255,90 107.242.008,65
B. Income equalization -497.041,24 -767.824,41
C. Profit(Loss) carried forward 15.991.891,72 34.398.473,75
D. Result for the period -3.611.015,82 -17.541.036,46
IX Financial instruments lent 1.152.754,85 3.809.426,35
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares -4.022.480,64 -17.283.379,16 D. Other securities 23.551,08 9.320,54 G. Receivables, deposits, cash at bank and in hand
and payables -0,02 -0,18
H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -1.173.316,70 -1.051.034,71
II. Investment income and expenses A. Dividends 3.749.888,03 3.723.382,14 B. Interests a) Securities and money market instruments 73.081,50 141.156,94 b) Cash at bank and in hand and deposits 20.996,29 22.280,34 C. Interest on borrowings (-) -3.578,43 -18.183,88
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
484.208,31 20.944,06
B. Other 174.982,69
IV. Operating expenses A. Investment transaction and delivery costs (-) -339.753,65 -356.619,27 B. Financial expenses (-) -2.045,33 -53.413,15 C. Custodian's fee (-) -104.036,99 -134.232,35 D. Manager's fee (-) a) Financial management Classic Shares -674.192,61 -2.259.319,05 Institutional B Shares -1.359.104,16 -76.792,24 b) Administration and accounting management -146.123,53 -166.456,36 E. Administrative expenses (-) -325,49 -621,69 F. Formation and organisation expenses (-) -11.133,51 -18.720,57 G. Remuneration, social security charges and
pension -10,60 -47,07
H. Services and sundry goods (-) -27.335,88 -37.282,51 J. Taxes Classic Shares -17.427,37 -92.973,84 Institutional B Shares -5.471,35 37.655,55 K. Other expenses (-) -76.404,77 -121.682,69
Income and expenditure for the period Subtotal II + III + IV 1.561.230,46 784.057,05
V. Profit (loss) on ordinary activities before tax -3.611.015,82 -17.541.036,46
VII. Result for the period -3.611.015,82 -17.541.036,46
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 11.883.834,66 16.089.612,88 Profit (loss) brought forward from the previous
financial year 15.991.891,72 34.398.473,75
Profit for the period available for appropriation -3.611.015,82 -17.541.036,46 Income on the creation of shares (income on the
cancellation of shares) -497.041,24 -767.824,41
II. (Appropriations to) Deductions from capital -11.790.099,76
III. Profit (loss) to be carried forward 15.991.891,72
IV. (Dividends to be paid out) -93.734,90 -97.721,16
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND OIL
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Australia
CALTEX AUSTRALIA LTD - 4.472,00 AUD 19,210 67.648,73 0,08 0,07
ORIGIN ENERGY LTD - 58.046,00 AUD 11,620 531.139,87 0,62 0,58
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND OIL (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 72.360.159,36 45.809.789,71 118.169.949,07 Sales 63.199.058,29 86.855.848,69 150.054.906,98 Total 1 135.559.217,65 132.665.638,39 268.224.856,05 Subscriptions 102.516.280,69 70.792.656,04 173.308.936,73 Redemptions 93.426.540,64 107.844.859,42 201.271.400,06 Total 2 195.942.821,33 178.637.515,46 374.580.336,79 Monthly average of total assets
158.031.963,35 138.643.275,84 148.337.619,59
Turnover rate -38,21 % -33,16 % -71,70 %
1st half of year 2nd half of year YearPurchases 72.360.159,36 45.809.789,71 118.169.949,07 Sales 63.199.058,29 86.855.848,69 150.054.906,98 Total 1 135.559.217,65 132.665.638,39 268.224.856,05 Subscriptions 102.516.280,69 70.792.656,04 173.308.936,73 Redemptions 93.426.540,64 107.844.859,42 201.271.400,06 Total 2 195.942.821,33 178.637.515,46 374.580.336,79 Monthly average of total assets
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 2.060.919,50 2.060.919,50 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 68.656.288,23 3.699.320,31
2012 - 12 138.942.539,74 146.252.751,56
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 68.147.787,81 633,77
2012 - 12 56.968.563,42 636,55
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0174962713 EUR -0.86% 4.27% -1.40% 0.0654 29/09/2000 1.87%
DIV BE0174961707 EUR -0.86% 4.30% -1.39% 0.0654 29/09/2000 1.87%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228664031 EUR -0.85% 25/11/2011 8.52%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 4.09 EUR net (5.46 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.655% Classic Shares Capitalization: 1.67% Institutional B Shares Capitalization: 1.637% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 26,283 15,077 57.36%
CSFBSAS 54,489 31,660 58.10%
DEUTSCHE 3,779 1,874 49.58%
HSBC 4,271 2,257 52.86%
JP MORGAN 9,916 5,796 58.45%
MERRILL 11,513 7,124 61.87%
MORGAN STANLEY 12,219 6,579 53.84%
NOMURA 43,346 23,209 53.54%
SOCGEN 2,514 1,257 50.00%
UBSWDR 24,798 13,325 53.74%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 72.779,02 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ARC ENERGY CORP CAD 5.372 24,440 100.016,52
CRESCENT POINT ENERGY CORP CAD 5.295 37,620 151.746,71
HUSKY ENERGY INC CAD 11.065 29,400 247.818,24
MAGYAR OLAJ-ES (BUD) HUF 3.335 17755,000 203.327,12
PENN WEST PETROLEUM LTD CAD 3.700 10,800 30.441,08
POLSKI KONCERN NAFTO PLN 22.699 49,500 275.372,03
SUBSEA 7 SA NOK 8.000 132,100 144.033,15
Total 1.152.754,85
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FLEMISH COMMUNITY - 09/14 3.75% 31/03 EUR 1.250.000 EUR 1.337.513,75
OAT FRANCE 2003 4% 25/04/14 EUR 65.000 EUR 70.181,35
FRANCE - 04/55 4.00 % 25/04 EUR 181.000 EUR 221.826,90
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 385.000 EUR 431.397,51
Total 2.060.919,51 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Eurozone
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND EUROZONE
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 2 February 2001 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 264.23 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of euro-area companies.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR The euro crisis and fear that the European banking sector would collapse continued to cast a dark cloud over the market. On top of this, the stock markets were affected by vacillating sentiment about the economic situation, During the first quarter of 2012 relative economic optimism drove markets higher. After the gains slackened in April and May, a fine rally occurred from early June onwards, thereby negating the gloomier economic signals. At the end of December the benchmark (net return) of the fund was some 19% higher than at the end of 2011.
A limited number of sectors were given emphasis in the Equity Fund Eurozone portfolio over the past financial year 2012. The financial sector – a heavyweight in the fund's benchmark (with an average weighting of over 19%) – was underweighted in the portfolio. Given the expensive valuation and lack of price potential, real estate was not included in the portfolio. On account of uncertainties, especially in a number of peripheral markets in the euro area (Spain, Italy and Greece), a number of positions were taken in the bank sector outside of the benchmark. Potential regulatory risk (= political risk) on account of government debts, sluggish growth and low profitability were the most important arguments for underweighting the telecommunications and utilities sectors in the portfolio, despite the high dividend yield. On the basis of valuations, the underweightings of both sectors were virtually halved during the second half of the year, but even so the two sectors remained among the most underweighted in the portfolio. Doubts concerning the sustainability of the margins and of the economic recovery worldwide and in Asia in particular were behind our cautious attitude towards the industrially-related sectors (materials and capital goods). During the first half of the year the underweighting of capital goods was more than offset by an overweighting of materials, as a number of stocks in the latter sector were at historical lows. The worsening economic signals during the second half led to a reduction in the materials sector to a neutral weighting in the portfolio. This consequently left industrial cyclical sectors slightly underweighted. The energy sector was viewed as relatively attractive in terms of valuation and dividend yield, and with upside potential on any recovery in economic growth. The sector was overweighted in the portfolio. Technology benefited from strong growth in new products, good results and margins. The sector was overweighted, but as the momentum of profit revisions declined, the weighting was reduced somewhat. The equity markets’ occasionally pronounced risk aversion translated into relatively good performance by sectors deemed defensive (food and drink manufacturers, domestic goods and personal care). These sectors were overweighted in the portfolio during the portfolio by means of diversification with such names as BAT, Imperial Tobacco, Kerry and Anheuser-Bush. As their valuations grew increasingly generous, their weighting was skimmed off to arrive at a more neutral level. The deteriorating economic signals during the second half led to a more cautious attitude towards the more consumer-oriented cyclical stocks. In the portfolio consumer durables (including BMW, Daimler, LVMH and VW) were on average slightly underweighted in the portfolio during the year as a whole. Pharmaceuticals had been shunned for a long time due to a lack of product innovation, patent expiry and the reforms to healthcare insurance in the US. The sector responded to these challenges by means of reorganisations and the sale of non-strategic divisions. Good cash flows and better results from the pipeline pointed toward a more positive attitude towards the sector. During the first half the healthcare sector had a virtually neutral weighting in the portfolio. Selective profit-taking in response to strong market performances resulted in a slight underweighting of the sector in the second half. KBC Equity Fund Eurozone recorded an investment result of nearly 19% over the past year of 2012.
2.1.8 FUTURE POLICY In Europe the budgetary plans, tighter lending policy of the banks and major uncertainty among consumers and producers will continue to weigh on growth. Recovery is not anticipated until the second half of the year. In the US modest growth is anticipated. Even though the budget deficit is being sharply reduced in 2013, further cutbacks are certainly in prospect in the spring. The picture is very different in the ‘new world’: the strong economic growth is already creating some inflationary pressures in Asia. This means that monetary policy has to steer a much more cautious course. A further switch from export-led economic growth to a model based on domestic demand as the engine of growth in China and the rest of Asia will not just reduce the region's dependence on exports but will also mean lower savings and more imports from the West. Taking account of the uncertainties in respect of both economic performance and government debt in the euro area, any emphasis on particular sectors in the portfolio is likely to remain limited in the near future in terms of both number and scale. The financial sector in the euro area remains confronted by particularly weak economic growth and a debt crisis. In terms of structuring the underweighted position of the sector, the share selection will accordingly extend beyond the euro area. Utilities and the telecommunications sector will remain underweighted for the time being: the arguments for underweighting in 2012 remain in force in 2013. Despite the cheap valuation, the current weighting of energy can no longer be justified. High oil stocks, downward adjustments in demand and a geopolitical risk that cannot be factored in are the most important arguments. In the case of the more consumer-oriented sectors a cautious attitude is favoured. The bias in favour of low beta sectors with solid foundations (including food, drink and tobacco manufacturers) in the portfolio remains indicated for the time being. The industrial cyclical sectors will remain underweighted in the portfolio on balance in the near term. The growth prospects for technology remain in place. The sector remains cheap, also by historical standards, with very healthy balance sheets, and remains overweighted in the portfolio.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 499.064.897,28 177.403.690,59
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 760.323,20 900.081,00 a} Collateral received in the form of bonds 3.409.388,93 392.837,35 C. Shares and similar instruments a) Shares 495.871.341,91 175.671.959,93 Of which securities lent 3.151.510,53 417.994,98 D. Other securities 98.629,79
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 30.401,62 121,89 b) Tax assets 162.132,57 26.132,34 B. Payables a) Accounts payable (-) -280.793,67 -107.084,53 d) Collateral (-) -3.409.388,93 -392.837,35
V. Deposits and cash at bank and in hand A. Demand balances at banks 2.876.993,33 1.005.858,07
VI. Accruals and deferrals A. Expense to be carried forward 2.732,36 B. Accrued income 176.947,59 37.928,85 C. Accrued expense (-) -631.079,06 -134.039,32
TOTAL SHAREHOLDERS' EQUITY 499.064.897,28 177.403.690,59
A. Capital 440.739.871,65 170.191.525,21
B. Income equalization -1.539.966,37 -472.909,04
C. Profit(Loss) carried forward 7.185.586,88 10.647.860,97
D. Result for the period 52.679.405,12 -2.962.786,55
IX Financial instruments lent 3.151.510,53 417.994,98
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -139.757,80 1.019,20 C. Shares and similar instruments a) Shares 44.074.296,36 -3.768.074,80 D. Other securities -35.908,59 -4.548,04 E. Open-end undertakings for collective investment -270.913,94 F. Derivative financial instruments l) Financial indices Futures and forward contracts 62.751,05 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 969.186,94 518.031,26
II. Investment income and expenses A. Dividends 15.172.648,80 1.341.655,71 B. Interests a) Securities and money market instruments 593.733,67 94.320,18 b) Cash at bank and in hand and deposits 38.608,83 5.283,87 C. Interest on borrowings (-) -1.727,91 -3.116,84
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
1.455.137,25 244.887,12
B. Other 9.733,90
IV. Operating expenses A. Investment transaction and delivery costs (-) -1.912.820,47 -394.192,63 B. Financial expenses (-) -5.230,65 -1.694,38 C. Custodian's fee (-) -143.817,04 -56.039,83 D. Manager's fee (-) a) Financial management Classic Shares -445.393,20 -433.956,35 Institutional B Shares -5.912.499,46 -122.370,09 b) Administration and accounting management -491.875,07 -39.614,33 E. Administrative expenses (-) -857,54 -1.610,08 F. Formation and organisation expenses (-) -33.362,92 -4.037,37 G. Remuneration, social security charges and
pension -65,91 -10,24
H. Services and sundry goods (-) -74.142,35 -9.970,46 J. Taxes Classic Shares -25.676,25 -15.653,97 Institutional B Shares -60.113,41 -13.322,13 K. Other expenses (-) -340.958,16 -101.343,36
Income and expenditure for the period Subtotal II + III + IV 7.811.588,21 498.948,72
V. Profit (loss) on ordinary activities before tax 52.679.405,12 -2.962.786,55
VII. Result for the period 52.679.405,12 -2.962.786,55
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 58.325.025,63 7.212.165,38 Profit (loss) brought forward from the previous
financial year 7.185.586,88 10.647.860,97
Profit for the period available for appropriation 52.679.405,12 -2.962.786,55 Income on the creation of shares (income on the
cancellation of shares) -1.539.966,37 -472.909,04
II. (Appropriations to) Deductions from capital -58.280.059,51
III. Profit (loss) to be carried forward 7.185.586,88
IV. (Dividends to be paid out) -44.966,12 -26.578,50
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND EUROZONE
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND EUROZONE (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 569.743.603,96 403.756.665,11 973.500.269,07 Sales 225.345.989,90 473.353.682,20 698.699.672,10 Total 1 795.089.593,86 877.110.347,32 1.672.199.941,17 Subscriptions 470.904.027,15 280.243.424,65 751.147.451,80 Redemptions 125.687.122,96 353.955.354,22 479.642.477,18 Total 2 596.591.150,11 634.198.778,87 1.230.789.928,98 Monthly average of total assets
434.237.109,74 540.121.426,79 487.602.805,53
Turnover rate 45,71 % 44,97 % 90,53 %
1st half of year 2nd half of year YearPurchases 569.743.603,96 403.756.665,11 973.500.269,07 Sales 225.345.989,90 473.353.682,20 698.699.672,10 Total 1 795.089.593,86 877.110.347,32 1.672.199.941,17 Subscriptions 470.904.027,15 280.243.424,65 751.147.451,80 Redemptions 125.687.122,96 353.955.354,22 479.642.477,18 Total 2 596.591.150,11 634.198.778,87 1.230.789.928,98 Monthly average of total assets
405.462.953,97 531.593.321,91 479.527.666,39
Corrected turnover rate 48,96 % 45,70 % 92,05 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 3.409.388,93 3.409.388,93 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 166.125.174,95 1.986.321,67
2012 - 12 706.003.064,53 450.482.937,09
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 163.956.991,30 292,34
2012 - 12 468.096.216,33 349,25
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0175979211 EUR 18.92% 0.50% -7.92% 0.0267 02/02/2001 -3.01%
DIV BE0175978205 EUR 18.92% 0.42% -7.97% 0.0263 02/02/2001 -3.04%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228543763 EUR 19.04% 24/11/2011 28.35%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 2.69 EUR net (3.59 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.563% Classic Shares Capitalization: 1.603% Institutional B Shares Capitalization: 1.544% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 156,207 89,380 57.22%
CSFBSAS 169,300 93,451 55.20%
DEUTSCHE 205,974 118,195 57.38%
HSBC 16,086 7,846 48.77%
JP MORGAN 16,650 10,282 61.75%
MERRILL 16,395 9,670 58.98%
MORGAN STANLEY 101,598 61,727 60.76%
NOMURA 125,723 73,831 58.73%
SOCGEN 3,090 1,373 44.44%
UBSWDR 180,749 105,670 58.46%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 162.954,46 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
IBERDROLA SA EUR 751.254 4,195 3.151.510,53
Total 3.151.510,53
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
GERMANY 12/13 0,00% 28/08 EUR 6.000 EUR 6.000,48
FRANCE - 04/55 4.00 % 25/04 EUR 2.777.000 EUR 3.403.388,45
Total 3.409.388,93 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Japan
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND JAPAN
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 17 April 1991 Initial subscription price: 75000 JPY Currency: JPY Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 26483 JPY Currency: JPY
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of Japanese companies.
RISK CONCENTRATION Japanese shares.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR KBC Equity Fund Japan invests in a diverse selection of Japanese companies. The fund underperformed its benchmark, MSCI Japan, in 2012. Over the first half of the 2012, the changing situation in Europe was the primary concern for investors who were in a risk-on, risk-off mode depending primarily on the Eurozone developments. Throughout the first quarter, the situation in Europe continued to improve and markets performed strongly. Investors accepted Greek sovereign debt swap offer and the European Central Bank provided support to troubled European banks. Economists were of opinion that China, the most important trading partner for Brazil and receiver of its commodities-based exports, will experience a slowdown in growth but short of outright recession. Global situation worsened in the second quarter of the year. In France, anti-austerity measures of a newly elected president were in opposition to the so-far dominating view advocated by German Chancellor Angela Merkel and resulted in a widening of an already existing rift in European policy. Investors were concerned that Greece, following local parliamentary elections, may leave with the Eurozone and return to its old currency, the drachma and cause an uncontrolled breakup of the European Monetary Union. Contagion fears spread to another weak link in a European chain – Spain. Its macroeconomic numbers continued to disappoint and Madrid was forced to ask for a bailout as costs of financing in capital markets were too high. Political issues were not the only force behind declines in equities. First half of the year saw a substantial deterioration in macro data globally – not only in Europe that remained in the spotlight, but also in the US and China. As a consequence, markets were very weak and in a risk-off mode, with most risk assets reversing the gains achieved in first months of the year. At the start of the second half of the year, markets moved considerably upwards although the start of the third quarter brought even more disappointing macroeconomic news. The US growth forecast was downgraded and problems in the Eurozone continued. The equity rally gained momentum towards the end of the summer on anticipation that central banks worldwide, and an American monetary authority in particular, will start a new round of monetary easing. The expectations proved to be true when the US Fed announced QE3 in September, along with the aim of keeping interest rates low until at least the middle of 2015. In the final quarter of the year, markets gained some positive momentum in its final months on the expectation that a political resolution of ‘fiscal cliff’ issue in the United States would be found and cuts in spending and increases in taxes, which would likely prompt the US into recession, would be avoided. Other main news over the period were successful leadership transition in China and elections in Japan. In Japan the year started out brightly with markets growing strongly during the first quarter. This rally was primarily driven by foreign investors who were constant net buyers for the quarter, betting on a more aggressive stance from Japan authorities on in their efforts to weaken the Yen. April brought about the end of the Q1 rally as Japan markets fell almost 6% on the back of weaker than expected figures in the US and mounting concerns over Europe. The end of April saw the Bank Of Japan announce a series of monetary easing. Markets were disappointed with the announcement as many investors had been hoping for more aggressive measures. May brought about even further declines in Japanese equities as concerns over Europe continued to mount and fears of a slowing economy in China. The credit rating agency Fitch cut its rating on Japan Yen debt by on notch and foreign debt by two notches to A+. June brought about a much need rebound, the Topix reached a new low since 1983. This rebound was brought about by the unexpected rate cut in China and positive political results in the Greece and Japan. Prime Minister Noda managed to find a compromise with the opposition parties on the increase of VAT from 5% to 10% by 2015, this law was passed by the lower house and must now be approved by the upper house. The second half of the year started on a mixed note, investors remained concerned by the slowing world economy but monetary steps by Europe and the US helped support sentiment. Diplomatic tensions deteriorated between China and Japan over ownership of the Senkaku islands. Anti Japan demonstrations in China had a strong impact on Chinese related stocks, particularly Japanese Auto manufacturers with several companies forced to close plants in China. Japanese companies problems were further compounded by the strong yen. In mid November Prime Minister Noda announced the dissolution of the Lower House and to hold a general election on the 16th of December. This had a positive reaction from investors, who expected that the LDP would be back in power and would implement a more pro-growth and reflationary policy. This announcement also brought about the start of a phase of depreciation in the Yen which last up until the end of the year. The lower election saw the LDP and its coalition partner win by a larger than expected margin, claiming over two thirds of the seats and hold an absolute majority. (Giving them the power to override most decisions made by the Upper House.) The newly elected Prime Minister Mr Abe, called for more bold and aggressive monetary easing, and also threatened the Bank Of Japan to revise the law guaranteeing the Bank Of Japan’s independence.
2.1.8 FUTURE POLICY Looking forward, we believe that 2013 will be a year of sluggish and weak growth for the overall global economy. While global growth is expected to be positive it is not anticipated that it will be much more positive when compared to 2012. Developed markets are being highlighted as the point of weakness with only modest expansion expected. The ongoing fiscal crisis in the Eurozone is expected to continue its negative influence on global growth. Despite the European Central Bank’s efforts to control and address the crisis, Europe remains in an unstable condition. Economic releases for the Eurozone countries are not supportive with overall GDP figures expected to continue their decline in 2013. A second cause of concern is the fiscal restructuring as a result of the credit crisis that remains, almost 5 years on, for both the US and Eurozone. Household incomes and corporate and financial sector rebalancing is expected to continue hindering consumption growth in these regions. The fiscal austerity that is being forced upon consumers is making stable domestic growth for many countries virtually impossible. While a political crisis has been averted in the US after a last minute agreement regarding the fiscal cliff, this may only a short term solution in advance of the debt ceiling debate to follow in February. Inflation is expected to remain contained in developed markets this year allowing monetary policy to focus on growth. In the US, growth is predicted to improve in the second half of the year along with improvement in the housing market and unemployment figures. There is a sense of caution in the market of whether the new Japanese Government will finally be able to break the deflationary cycle in Japan. In January, the new Administration plans to announce a new economic stimulus package. Prime Minister Abe will also appoint a new governor to the BOJ and two deputy governors in the first half of 2013, this will likely lead to a shift in balance on the policy board of the BOJ. It would appear that growth in 2013 will emanate from the same source as 2012, with almost 90% of global GDP growth expected to originate from Emerging Markets. Growth is also expected to continue in China where considerable confidence remains, however it is not expected to surpass the growth of 2012. In relation to the BRIC countries, Brazil is expected to exhibit the most improved growth as its economy rebounds as a result of the monetary and fiscal policies introduced this year. The key macro issues facing Emerging Markets in 2013 are the EU sovereign debt crisis, US fiscal policy and Chinese growth.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 778.791.718,00 887.274.173,00
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 4.558.359,00 4.727.870,00 a} Collateral received in the form of bonds 6.223.015,00 2.608.846,00 C. Shares and similar instruments a) Shares 773.235.541,00 878.435.365,00 Of which securities lent 5.751.092,00 21.827.000,00 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -266.190,00 132.454,00 m) Financial indices Futures and forward contracts (+/-) 418.800,00 75.000,00
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 116.484,00 2.407,00 c) Collateral 210.000,00 B. Payables a) Accounts payable (-) -2.658.571,00 -410.453,00 c) Borrowings (-) -952.072,00 -5.716.232,00 d) Collateral (-) -6.223.015,00 -2.608.846,00
V. Deposits and cash at bank and in hand A. Demand balances at banks 3.918.195,00 9.570.968,00
VI. Accruals and deferrals A. Expense to be carried forward 58.423,00 B. Accrued income 1.398.136,00 1.056.699,00 C. Accrued expense (-) -976.964,00 -868.328,00
TOTAL SHAREHOLDERS' EQUITY 778.791.718,00 887.274.173,00
A. Capital 661.544.399,00 1.151.825.438,00
B. Income equalization -1.633.082,00 716.760,00
D. Result for the period 118.880.401,00 -265.268.025,00
I.A.B Cash at bank and in hand/deposits 210.000,00
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 9.969.000,00 14.525.000,00
IX Financial instruments lent 5.751.092,00 21.827.000,00
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -837.132,00 5.354,00 C. Shares and similar instruments a) Shares 109.842.424,00 -275.768.713,00 F. Derivative financial instruments l) Financial indices Futures and forward contracts 998.650,00 5.906.981,00 G. Receivables, deposits, cash at bank and in hand
and payables 1,00
H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -398.644,00 132.454,00 b) Other foreign exchange positions and
transactions 434.709,00 59.845,00
II. Investment income and expenses A. Dividends 21.447.664,00 23.602.153,00 B. Interests a) Securities and money market instruments 1.927.619,00 759.013,00 b) Cash at bank and in hand and deposits 1.491,00 29.286,00 C. Interest on borrowings (-) -29.658,00 -58.958,00
III. Other income B. Other 31.729,00
IV. Operating expenses A. Investment transaction and delivery costs (-) -1.529.752,00 -2.009.735,00 B. Financial expenses (-) -12.967,00 -150.824,00 C. Custodian's fee (-) -742.498,00 -1.202.269,00 D. Manager's fee (-) a) Financial management Classic Shares -10.396.855,00 -14.183.372,00 b) Administration and accounting management -783.739,00 -1.015.843,00 E. Administrative expenses (-) -6.331,00 -2.024,00 F. Formation and organisation expenses (-) -82.194,00 -127.301,00 H. Services and sundry goods (-) -251.161,00 -222.350,00 J. Taxes Classic Shares -619.471,00 -826.360,00 K. Other expenses (-) -81.755,00 -227.091,00
Income and expenditure for the period Subtotal II + III + IV 8.840.393,00 4.396.054,00
V. Profit (loss) on ordinary activities before tax 118.880.401,00 -265.268.025,00
VII. Result for the period 118.880.401,00 -265.268.025,00
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 117.247.319,00 -264.551.265,00 Profit for the period available for appropriation 118.880.401,00 -265.268.025,00 Income on the creation of shares (income on the
cancellation of shares) -1.633.082,00 716.760,00
II. (Appropriations to) Deductions from capital -115.956.220,00 265.564.561,00
IV. (Dividends to be paid out) -1.291.099,00 -1.013.296,00
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND JAPAN
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND JAPAN (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 279.041.877,37 231.702.838,93 510.744.716,30 Sales 422.229.405,26 305.079.365,29 727.308.770,55 Total 1 701.271.282,63 536.782.204,22 1.238.053.486,85 Subscriptions 25.433.007,00 14.085.094,00 39.518.101,00 Redemptions 172.183.386,00 92.149.281,00 264.332.667,00 Total 2 197.616.393,00 106.234.375,00 303.850.768,00 Monthly average of total assets
878.203.134,11 728.748.718,49 801.912.595,59
Turnover rate 57,35 % 59,08 % 116,50 %
1st half of year 2nd half of year YearPurchases 279.041.877,37 231.702.838,93 510.744.716,30 Sales 422.229.405,26 305.079.365,29 727.308.770,55 Total 1 701.271.282,63 536.782.204,22 1.238.053.486,85 Subscriptions 25.433.007,00 14.085.094,00 39.518.101,00 Redemptions 172.183.386,00 92.149.281,00 264.332.667,00 Total 2 197.616.393,00 106.234.375,00 303.850.768,00 Monthly average of total assets
869.990.481,64 727.780.775,90 800.777.218,67
Corrected turnover rate 57,89 % 59,16 % 116,66 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
Institutional B Shares Change in number of shares in circulation: Nil Amounts received and paid by the UCI: Nil Net asset value: Nil
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0126163634 EUR 0.90% 2.82% -5.76% -1.23% 17/04/1991 -2.30%
CAP BE0126163634 JPY 15.16% -2.47% -12.30% -2.09% 17/04/1991 -3.87%
DIV BE0152250578 EUR 0.89% 2.79% -5.78% -1.24% 17/04/1991 -2.31%
DIV BE0152250578 JPY 15.15% -2.50% -12.32% -2.11% 17/04/1991 -3.88%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
The cumulative returns are shown where they relate to a period of at least one year. Classic Shares
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in JPY and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Dividend on ex-dividend date 28/03/2013: 234 JPY net (312 JPY gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.614% Classic Shares Capitalization: 1.597% Institutional B Shares Capitalization: Not applicable * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 665 416 62.52%
CSFBSAS 64 23 36.36%
MERRILL 5,120 3,095 60.44%
MORGAN STANLEY 1,626 963 59.23%
NOMURA 304 111 36.39%
UBSWDR 753 471 62.52%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The TOPIX Index (Tokyo Stock Price Index) is a capitalisation-weighted index of all shares listed on the ‘First Section’ of the Tokyo Stock Exchange. The index was developed with a starting value of 100 on 4 January 1968. Tokyo Stock Exchange holds all ownership rights with regard to the index. Tokyo Stock Exchange in no way underwrites, guarantees or collaborates in the issue and offering of shares of this institution for collective investment. Tokyo Stock Exchange disclaims any liability for the issue and offering of shares of this institution for collective investment. The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 702.200,00 JPY. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ORIX CORP JPY 500 9690,000 4.845.000,00
RICOH JPY 999 907,000 906.092,52
Total 5.751.092,52
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 8.000 JPY 1.114.285
FRANCE 2004 1,60% 25/07/2015 EUR 33.000 JPY 4.834.178
NEDERLAND 2007 4,50% 15/07/17 EUR 2.000 JPY 274.553
Total 6.223.015 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund New Markets
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND NEW MARKETS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 17 April 1991 Initial subscription price: 20000 BEF Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 1254.36 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of companies in countries where conditions are such as to allow an accelerated economic growth in the short or medium term. More particularly, this involves countries in Asia, Latin America, Central Europe and Eastern Europe.
RISK CONCENTRATION Emerging market shares.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Equity Fund New Markets invests in a diversified portfolio of equities from emerging markets, primarily the Far East, Latin America and Eastern Europe. These markets have potential for accelerated growth in the medium term; however, the investor must be aware that such markets are more volatile than traditional equity markets. Although it was a volatile year for this fund, the performance was good, with the NAV of KBC Equity Fund New Markets rising from 1333.02 EUR on 29th December 2011 to 1548.72 EUR on 28th December 2012. Global emerging markets outperformed their developed peers in 2012, with most of this outperformance coming in the final quarter. Over the course of the year, international issues were some of the main drivers of equity markets, with emerging markets heavily influenced by this information. The top performing region in 2012 was Emerging Europe, followed closely by Emerging Asia. Latin America was a marked underperformer over the period.
The first quarter was heavily influenced by Europe with positive news from Greece as the country secured acceptance of their debt swap offer. The ECB continued to extend liquidity to European banks through the LTRO. In Russia, despite some unrest, Putin won the Russian presidential election. Markets were strong over this period, with global emerging markets outperforming significantly, particularly in January and February. Moving into the second quarter, the situation in Europe worsened. In May, French socialist, Francois Hollande won the French presidential election. Following parliamentary elections in Greece, it was not possible to form a government and a second election was called for mid-June with the uncertainty continuing in the meantime. At this stage, concern spread to the situation in Spain, with growth disappointing further and banks coming under more pressure. Despite initially stating that the country did not need a bailout, by the end of June, Spain had requested assistance from Europe and the IMF. In mid June, the second Greek election took place, with the New Democracy winning narrowly and forming a government. Throughout this period of uncertainty, markets were very weak globally, with most regions reversing most of the gains achieved in Q1. Global emerging markets underperformed their developed peers over this period of weakness. On the final day of the quarter, EU leaders agreed that Europe would support troubled banks directly, without the need for local governments to add to their debt levels, which caused a significant rally in markets. While in the second quarter Equity Fund New Markets reversed a lot of the gains from the first quarter, the fund maintained a positive overall performance for the full first half. The third quarter had a weak start, with the IMF forecast for 2012 growth in the US being reduced from 2.25% to 2% in the first week of the quarter. Negative headlines continued about the US fiscal cliff as well as the ongoing problems in Euroland. However towards the end of July, markets started to recover and to move upwards. August was a reasonable month for markets, with expectations rising ahead of Bernanke’s speech in Jackson Hole and investors looking to quantitative easing in Europe. Problems continued in Europe, with ongoing concerns and protests against austerity in Greece. September saw a rally in risky assets on the announcement of global policy stimulus. The major event of September occurred on September 13th when the US Fed announced QE3, along with the aim of keeping interest rates low until at least the middle of 2015. The final quarter of 2012 saw a good performance for the Asian region in particular, with the focus returning to domestic issues and in particular the positive news flow from China (discussed further below). Despite concerns on the fiscal cliff ahead at the start of January, markets continued to expect that some sort of resolution would be found on this issue and December saw a strong rise in equity prices. Other positives over the period were the agreement of a bailout for Spanish banks and improved sentiment in Japan following the strong election result. China dominated the headlines in Asia over the year of 2012. Until September, investors were concerned about weakening growth in China, which is the top country position in this fund. Growth was slower than most expected, with the official growth target being lowered to 7.5%. Most domestic activity metrics were weak – industrial production, investment and retail sales. On the positive side, inflation continued to fall, leaving room for policy makers to make changes if needed. While there was some slowdown in employment growth, there was no mass unemployment as was seen in 2008/2009. Following this slowdown, Chinese authorities began to take steps to boost growth. Initially the focus was on increasing investment, with particular focus on water and other environmental areas, utilities, railways and social housing. However at the beginning of June, the People’s Bank of China took the decision to lower lending and deposit rates by 25bps. They also took steps to liberalise the interest rate regime, seen as a significant positive. Continued weakening in the PMI into the third quarter caused a continued loosening of policy in the country. Trade also remained weak across Asia, heavily influenced by the global demand issues. Following the actions taken by policy makers in China earlier in the year, macroeconomic indicators began to improve in Q4. Over the quarter, we saw the completion of a successful leadership transition in the country and while it will be 2013 before the leadership takes action on most items, the transition was completed smoothly which was a positive for the market. China performed very well on this period and positively affected performance across most emerging markets. Within Emerging Europe, the best performing market was Turkey, which decoupled from the overall risk-off/on changes in global sentiment. Turkish GDP grew at 3-4% dispelling worries about a hard landing and the current account deficit steadily improved from the highs of 2011. Fitch upgraded the Turkish credit rating to investment grade in November resulting in fresh capital flowing into the market. The Russian index lagged both developed and emerging markets in 2012. International investors were concerned about long-term negative factors such as high corruption and poor corporate governance as well as strong national protests against Putin’s establishment.
As noted above, Latin America underperformed significantly amongst its emerging market peers in 2012. The weakness in China in the first part of the year affected Brazil, for whom China is the important trading partner. GDP growth for Brazil disappointed relative to expectations and had to be revised downwards, with the estimate at year-end being a lacklustre 1%. The benchmark interest rate in Brazil finished the year at 7.25%, an all-time low, down from 11% at the start of the year, following proactive cuts by the Brazilian Central Bank.
2.1.8 FUTURE POLICY While the outlook currently for emerging markets is more positive than the outlook a year ago, this is not to say that we do not expect any turbulence ahead. Europe has taken some steps to address their issues and the outlook for growth in the US has improved significantly. In China, it appears that the risk of a hard landing has falling significantly, with the stabilisation and improvement in many macroeconomic factors in recent months. We still have some concerns on long-term growth for the country; however the shorter-term outlook has clearly improved in line with our expectations over recent months. Across most Asian markets, we remain in a position where policy makers have the ability to take steps to loosen policy further if they see additional risks to growth, a luxury that policy makers in many developed economies no longer have. The recovery in China will likely be a key driver for the Asian region and policy announcements from the new leadership in 2013 should support growth. Due to its proximity to and dependence on Western Europe, the debt issues being addressed at European level heavily influence the outlook for Emerging Europe. Movement towards resolving some of the outstanding issues during 2013 will be a positive in this regard. Within Latin America, Brazil clearly dominates and following the weak performance in 2012, we are positive on the outlook going forward. Due to the dependence on international trade and China in particular, we are expecting to see a stronger economic picture in 2013. Following the weakness in 2012, valuations are at attractive levels. In summary, the outlook for emerging markets appears to have less risk factors than a year ago. Obviously, concerns remain about the problems in Europe, global trade and the slowing growth in China; however we are positive on the outlook for 2013. Valuations continue to be supportive across the region. As a result, we continue to be positive on the outlook for global emerging markets.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 82.469.472,46 64.016.054,53
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 297.803,20 352.543,50 a} Collateral received in the form of bonds 3.377.390,76 1.534.102,73 C. Shares and similar instruments a) Shares 76.235.695,33 59.602.216,35 Of which securities lent 2.661.896,17 1.619.211,87 D. Other securities 3.580,02 10.201,61 E. Open-end undertakings for collective investment 5.460.072,19 3.793.538,69 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -3.051,44 2.092,85 m) Financial indices Futures and forward contracts (+/-) 3.155,98 -5.597,74
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 485.671,92 21.070,74 c) Collateral 16.049,01 41.414,57 B. Payables a) Accounts payable (-) -200.498,67 -90.655,85 c) Borrowings (-) -188.599,54 -42.623,70 d) Collateral (-) -3.377.390,76 -1.534.102,73
V. Deposits and cash at bank and in hand A. Demand balances at banks 317.410,20 289.980,03
VI. Accruals and deferrals A. Expense to be carried forward 2.251,79 B. Accrued income 102.319,28 115.875,77 C. Accrued expense (-) -60.135,02 -76.254,08
TOTAL SHAREHOLDERS' EQUITY 82.469.472,46 64.016.054,53
A. Capital 43.464.716,87 35.506.951,70
B. Income equalization -3.391,24 -116.277,39
C. Profit(Loss) carried forward 28.436.497,89 44.179.036,29
D. Result for the period 10.571.648,94 -15.553.656,07
I.A.B Cash at bank and in hand/deposits 16.049,01 41.414,57
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 554.155,62 693.286,19
IX Financial instruments lent 2.661.896,17 1.619.211,87
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -54.740,30 399,20 C. Shares and similar instruments a) Shares 10.189.408,65 -14.280.286,83 D. Other securities 3.527,72 -6.546,98 E. Open-end undertakings for collective investment 892.018,86 -769.900,62 F. Derivative financial instruments l) Financial indices Futures and forward contracts 52.788,46 -5.597,74 G. Receivables, deposits, cash at bank and in hand
and payables 0,34 -0,06
H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -5.144,29 2.092,85 b) Other foreign exchange positions and
transactions -1.150.585,31 -677.256,21
II. Investment income and expenses A. Dividends 2.002.448,17 1.756.183,61 B. Interests a) Securities and money market instruments 98.810,30 49.730,21 b) Cash at bank and in hand and deposits 4.045,94 3.066,67 C. Interest on borrowings (-) -2.900,95 -3.840,46
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
148.683,18 812,90
B. Other 3.392,28
IV. Operating expenses A. Investment transaction and delivery costs (-) -314.135,95 -220.644,16 B. Financial expenses (-) -911,71 -3.901,78 C. Custodian's fee (-) -50.243,09 -56.025,03 D. Manager's fee (-) a) Financial management Classic Shares -859.572,42 -1.151.281,21 Institutional B Shares -260.077,70 -10.408,99 b) Administration and accounting management -77.964,61 -77.579,20 E. Administrative expenses (-) -266,46 -163,68 F. Formation and organisation expenses (-) -5.981,75 -8.009,02 G. Remuneration, social security charges and
pension -5,91 -16,08
H. Services and sundry goods (-) -13.506,97 -15.545,44 J. Taxes Classic Shares 483,65 -63.436,25 Institutional B Shares 124,52 4.102,66 K. Other expenses (-) -24.653,43 -22.996,71
Income and expenditure for the period Subtotal II + III + IV 644.374,81 183.440,32
V. Profit (loss) on ordinary activities before tax 10.571.648,94 -15.553.656,07
VII. Result for the period 10.571.648,94 -15.553.656,07
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 39.004.755,59 28.509.102,83 Profit (loss) brought forward from the previous
financial year 28.436.497,89 44.179.036,29
Profit for the period available for appropriation 10.571.648,94 -15.553.656,07 Income on the creation of shares (income on the
cancellation of shares) -3.391,24 -116.277,39
II. (Appropriations to) Deductions from capital -38.882.662,20
III. Profit (loss) to be carried forward 28.436.497,89
IV. (Dividends to be paid out) -122.093,39 -72.604,94
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND NEW MARKETS
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Open-end funds
UCITS registered with the FSMA
Belgium
HORIZON ACCESS INDIA FD KAP 6.824,70 USD 1.054,780 5.460.072,19 4,68 6,66 6,63
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND NEW MARKETS (IN
THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 34.401.655,46 34.709.325,33 69.110.980,79 Sales 32.996.401,06 27.865.427,22 60.861.828,28 Total 1 67.398.056,52 62.574.752,55 129.972.809,07 Subscriptions 22.285.836,28 23.554.632,38 45.840.468,66 Redemptions 20.694.007,29 17.046.072,70 37.740.079,99 Total 2 42.979.843,57 40.600.705,08 83.580.548,65 Monthly average of total assets
77.194.244,36 79.740.314,31 78.493.690,85
Turnover rate 31,63 % 27,56 % 59,10 %
1st half of year 2nd half of year YearPurchases 34.401.655,46 34.709.325,33 69.110.980,79 Sales 32.996.401,06 27.865.427,22 60.861.828,28 Total 1 67.398.056,52 62.574.752,55 129.972.809,07 Subscriptions 22.285.836,28 23.554.632,38 45.840.468,66 Redemptions 20.694.007,29 17.046.072,70 37.740.079,99 Total 2 42.979.843,57 40.600.705,08 83.580.548,65 Monthly average of total assets
75.327.655,94 78.456.324,87 77.250.908,21
Corrected turnover rate 32,42 % 28,01 % 60,05 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
Capitalization Distribution Capitalization Distribution
2011 - 12 6.989.242,63 226.686,04
2012 - 12 38.612.023,04 25.988.199,74
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 7.176.708,80 1.330,01
2012 - 12 21.227.656,91 1.552,75
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0126164640 EUR 16.18% 6.38% -0.38% 11.49% 17/04/1991 5.39%
DIV BE0152251584 EUR 16.17% 6.37% -0.38% 11.47% 17/04/1991 5.38%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228663025 EUR 16.08% 24/11/2011 21.02%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 8.66 EUR net (11.54 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.679% Classic Shares Capitalization: 1.719% Institutional B Shares Capitalization: 1.742% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 46,980 28,233 60.10%
CSFBSAS 7,424 4,074 54.87%
DEUTSCHE 179 52 29.03%
EQ CSA MACQUARIE 1,208 690 57.14%
HSBC 978 223 22.75%
MERRILL 6,400 3,657 57.14%
MORGAN STANLEY 3,791 2,115 55.78%
NOMURA 21,195 12,844 60.60%
UBSWDR 3,357 2,070 61.67%
WOOD 940 215 22.87%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.6% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.6% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek.
Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The Hang Seng China Enterprises Index is a capitalization-weighted index comprised of state-owned Chinese companies (H-Shares) listed on the Stock Exchange of Hong Kong. The base value of this index is 2000 as of January 3, 2000. The Stock Exchange of Hong Kong has all proprietary rights with repect to the index. In no way the Stock Exchange of Hong Kong endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. The Stock Exchange of Hong Kong disclaims any liability for the issue and offering of the shares of this undertaking for collective investment. The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service.
Name Maximum management fee Horizon-Access India Fund-Classic Shares 1,60 KBC Equity Fund-New Markets-Classic Shares 1,60 KBC Equity Fund-New Markets-Institutional B Shares 1,60
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 34.122,09 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ANGLO AMERICAN PLATINUM LTD ZAR 500 446,330 19.950,74
BANK PEKAO SA PLN 2.770 167,500 113.711,00
CHINA NATL. BUILDING MATERIAL -H- HKD 205.999 11,340 228.603,31
CHINA RAILWAY CONSTRUCTIO-H- HKD 225.499 8,810 194.412,81
ZIJIN MINING GROUP CO -H- HKD 455.999 3,050 136.103,12
Total 2.661.896,17
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FLEMISH COMMUNITY - 09/14 3.75% 31/03 EUR 1.900.000 EUR 2.033.020,90
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 79.000 EUR 96.522,52
FRANCE 2003 2,25% 25/07/2020 EUR 464.000 EUR 675.144,59
FRANCE 2004 1,60% 25/07/2015 EUR 268.000 EUR 344.380,54
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 136.000 EUR 149.936,19
BTAN FRANCE 2008 4 1/2% 12/07/13 EUR 75.000 EUR 78.386,03
Total 3.377.390,77 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund New Asia
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND NEW ASIA
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 28 January 1994 Initial subscription price: 20000 BEF Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 444.36 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of companies in Asian countries where conditions are such as to allow on accelerated economic growth in the short or medium term.
RISK CONCENTRATION Asian shares.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR KBC Equity Fund New Asia fund tracks the MSCI Emerging Asia. It has holdings in what are considered the emerging stock markets in Asia, namely China, Korea, Taiwan, India, Philippines, Malaysia, Thailand and Indonesia. The NAV of KBC Equity Fund New Asia rose from 468.68 EUR on 29th December 2011 to 554.86 EUR on 28th December 2012. Emerging Asia saw a positive performance over 2012, with the region outperforming in a global context. The first half saw the region move in line with its global peers as performance was largely driven by international factors. In the first quarter, the spotlight was largely on the situation in Europe. Towards the beginning of the year, there was positive news from Greece as the country secured acceptance of their debt swap offer. The ECB continued to extend liquidity to European banks through the LTRO.
Moving into the second quarter, the situation in Europe worsened. In May, French socialist, Francois Hollande won the French presidential election. Following parliamentary elections in Greece, it was not possible to form a government and a second election was called for mid-May with the uncertainty continuing in the meantime. Despite initially stating that the country did not need a bailout, by the end of June, Spain had requested assistance from Europe and the IMF. In mid May, the second Greek election took place, with the New Democracy winning narrowly and forming a government. Throughout this period of uncertainty, markets were quite weak, with most regions reversing the gains achieved in Q1. On the final day of the quarter, EU leaders agreed that Europe would support troubled banks directly, without the need for local governments to add to their debt levels. This saw a significant rally on the final day of the first half. While global issues dominated over the first half, the local news in China did not help to boost sentiment. Investors worried about the outlook for growth in China which came in behind expectations, with the official growth target being lowered to 7.5%. Most domestic activity metrics were weak – industrial production, investment and retail sales. On the positive side, inflation continued to fall, leaving room for policy makers to make changes if needed. Following this slowdown, Chinese authorities began to take steps to boost growth. Initially the focus was on increasing investment, with particular focus on water and other environmental areas, utilities, railways and social housing. However at the beginning of June, the People’s Bank of China took the decision to lower lending and deposit rates by 25bps. They also took steps to liberalise the interest rate regime, seen as a significant positive. The third quarter had a weak start, with the IMF forecast for 2012 growth in the US being reduced from 2.25% to 2% in the first week of the quarter. The disappointment continued with Bernanke’s report to Congress. Negative headlines continued about the US fiscal cliff as well as the ongoing problems in Euroland. However towards the end of July, markets started to recover and to move upwards. August was a reasonable month for markets, with expectations rising ahead of Bernanke’s speech in Jackson Hole and investors looking to quantitative easing in Europe. In Asia, investors were concerned by an ongoing slowdown in the PMI and slowing profit levels in China. However policy makers in China continued to loosen policy, the positive impact of which would be seen by year-end. Trade also remained weak across Asia, heavily influenced by the global demand issues. Problems continued in Europe, with ongoing concerns and protests against austerity in Greece. September saw a rally in risky assets on the announcement of global policy stimulus. The major event of September occurred on September 13th when the US Fed announced QE3, along with the aim of keeping interest rates low until at least the middle of 2015. The final quarter of 2012 saw a good performance for the Asian region, with the focus returning to domestic issues and in particular the positive news flow from China. China has a strong impact across the region given its 30% weighting in the index and its importance to the other countries in the region. Following the stimulus in China earlier in the year, macroeconomic indicators began to improve in Q4. Over the quarter, we saw the completion of a successful leadership transition in the country and while it will be 2013 before the leadership takes action on most items, the transition was completed smoothly which was a positive for the market. While the Chinese news was a significant driver of the region over the period, international factors continued to influence sentiment. Despite concerns on the fiscal cliff ahead at the start of January, markets continued to expect that some sort of resolution would be found on this issue and December saw a strong rise in equity prices. Other positives over the period were the agreement of a bailout for Spanish banks and improved sentiment in Japan following the strong election result. Within Asia, the strongest performing markets in 2012 were the Philippines and Thailand, which comprise approximately 2% and 6% of the fund respectively. However China and India also outperformed the region and are much larger weights of the fund at approximately 30% and 11% respectively. As noted above, the outperformance of China was due to the positive economic numbers released towards year-end, with most of this positive performance coming in the final quarter. The countries that lagged were Malaysia and Indonesia, which represent approximately 4% and 6% of the portfolio respectively. The top performing sectors were Utilities and Healthcare, with Materials and Consumer Discretionary lagging.
2.1.8 FUTURE POLICY We continue to have a positive outlook for Emerging Asia. One of the main concerns in the Asian region in 2012 was that China was going to experience a hard landing, however recently reported indicators show that the likelihood of this has diminished. We expect a further improvement in fundamentals will continue to drive the market going forward. Overall, a reasonable level of good quality growth continues to be seen in Emerging Asia. Relative to developed markets, the region is not experiencing the same deleveraging that is being experienced elsewhere, particularly in Europe. While growth has clearly slowed in recent years, we do not expect a major deterioration from current levels going forward. Inflation is always a topic that should be looked at in Asia, given the importance of price stability to the population. Looking into 2013, there are increasing pressures on price levels; however these are starting from a low base and are not significant at this stage. Policy makers still have the possibility to loosen monetary policy if need to deal with any issues.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 235.229.370,36 174.810.886,40
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 790.163,20 935.406,00 a} Collateral received in the form of bonds 10.027.375,54 22.392.941,48 C. Shares and similar instruments a) Shares 213.819.458,17 159.653.465,50 Of which securities lent 9.319.143,52 23.648.614,14 D. Other securities 23,84 44.873,20 E. Open-end undertakings for collective investment 19.272.165,88 13.338.985,70 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -8.500,43 6.024,74 m) Financial indices Futures and forward contracts (+/-) 8.836,74 -15.193,85
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 106.275,07 108.369,17 c) Collateral 44.937,22 112.410,98 B. Payables a) Accounts payable (-) -181.651,75 -610.904,30 c) Borrowings (-) -313.691,86 -88.827,60 d) Collateral (-) -10.027.375,54 -22.392.941,48
V. Deposits and cash at bank and in hand A. Demand balances at banks 1.837.254,27 1.406.970,81
VI. Accruals and deferrals A. Expense to be carried forward 12.815,24 B. Accrued income 184.834,91 117.537,05 C. Accrued expense (-) -330.734,90 -211.046,24
TOTAL SHAREHOLDERS' EQUITY 235.229.370,36 174.810.886,40
A. Capital 138.185.315,48 112.269.227,25
B. Income equalization -844.114,21 -568.654,02
C. Profit(Loss) carried forward 62.451.793,34 117.358.245,66
D. Result for the period 35.436.375,75 -54.247.932,49
I.A.B Cash at bank and in hand/deposits 44.937,22 112.410,98
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 1.547.721,34 1.881.776,80
IX Financial instruments lent 9.319.143,52 23.648.614,14
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -145.242,80 1.059,20 C. Shares and similar instruments a) Shares 26.869.723,24 -44.750.890,50 D. Other securities 8.648,66 -23.631,16 E. Open-end undertakings for collective investment 2.265.393,56 -5.084.062,19 F. Derivative financial instruments l) Financial indices Futures and forward contracts 129.419,79 -15.193,85 H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -14.525,17 6.024,74 b) Other foreign exchange positions and
transactions 4.139.318,16 -4.281.475,30
II. Investment income and expenses A. Dividends 6.296.545,69 5.140.442,75 B. Interests a) Securities and money market instruments 659.376,15 289.817,23 b) Cash at bank and in hand and deposits 10.023,09 20.863,07 C. Interest on borrowings (-) -10.852,35 -9.984,99
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
950.486,68 42.571,27
B. Other 19.959,72
IV. Operating expenses A. Investment transaction and delivery costs (-) -1.347.896,44 -1.336.029,31 B. Financial expenses (-) -3.083,70 -13.394,13 C. Custodian's fee (-) -141.157,07 -255.077,18 D. Manager's fee (-) a) Financial management Classic Shares -2.006.534,40 -3.407.151,66 Institutional B Shares -1.665.020,89 -80.927,56 b) Administration and accounting management -261.876,58 -220.965,41 E. Administrative expenses (-) -499,40 20,38 F. Formation and organisation expenses (-) -19.835,99 -23.868,97 G. Remuneration, social security charges and
pension -23,20 -52,75
H. Services and sundry goods (-) -43.437,33 -49.036,93 J. Taxes Classic Shares -104.776,59 -133.917,35 Institutional B Shares -10.918,54 30.946,84 K. Other expenses (-) -116.878,82 -113.978,45
Income and expenditure for the period Subtotal II + III + IV 2.183.640,31 -99.763,43
V. Profit (loss) on ordinary activities before tax 35.436.375,75 -54.247.932,49
VII. Result for the period 35.436.375,75 -54.247.932,49
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 97.044.054,88 62.541.659,15 Profit (loss) brought forward from the previous
financial year 62.451.793,34 117.358.245,66
Profit for the period available for appropriation 35.436.375,75 -54.247.932,49 Income on the creation of shares (income on the
cancellation of shares) -844.114,21 -568.654,02
II. (Appropriations to) Deductions from capital -96.794.248,68
III. Profit (loss) to be carried forward 62.451.793,34
IV. (Dividends to be paid out) -249.806,20 -89.865,81
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND NEW ASIA
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Open-end funds
UCITS registered with the FSMA
Belgium
HORIZON ACCESS INDIA FD KAP 24.088,84 USD 1.054,780 19.272.165,88 16,53 8,25 8,20
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND NEW ASIA (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 223.526.420,82 104.109.157,83 327.635.578,65 Sales 134.189.536,90 168.055.944,63 302.245.481,52 Total 1 357.715.957,71 272.165.102,46 629.881.060,17 Subscriptions 159.228.472,50 87.984.061,85 247.212.534,35 Redemptions 67.206.265,19 152.904.383,33 220.110.648,52 Total 2 226.434.737,69 240.888.445,18 467.323.182,87 Monthly average of total assets
274.517.162,16 255.957.608,24 264.911.778,99
Turnover rate 47,82 % 12,22 % 61,36 %
1st half of year 2nd half of year YearPurchases 223.526.420,82 104.109.157,83 327.635.578,65 Sales 134.189.536,90 168.055.944,63 302.245.481,52 Total 1 357.715.957,71 272.165.102,46 629.881.060,17 Subscriptions 159.228.472,50 87.984.061,85 247.212.534,35 Redemptions 67.206.265,19 152.904.383,33 220.110.648,52 Total 2 226.434.737,69 240.888.445,18 467.323.182,87 Monthly average of total assets
265.552.561,89 243.796.533,49 259.151.365,93
Corrected turnover rate 49,44 % 12,83 % 62,73 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
Capitalization Distribution Capitalization Distribution
2011 - 12 67.000.736,71 8.598.202,97
2012 - 12 203.372.247,68 185.645.933,91
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 61.162.118,28 466,86
2012 - 12 91.425.639,06 557,19
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0146025409 EUR 18.39% 6.18% -0.82% 8.71% 28/01/1994 0.60%
DIV BE0152245529 EUR 18.34% 6.16% -0.83% 8.69% 28/01/1994 0.58%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228552855 EUR 18.39% 24/11/2011 22.36%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 2.24 EUR net (2.98 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.721% Classic Shares Capitalization: 1.779% Institutional B Shares Capitalization: 1.713% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 251,354 151,362 60.22%
CSFBSAS 428 245 57.14%
MERRILL 9,377 5,861 62.50%
MORGAN STANLEY 11,365 7,103 62.50%
NOMURA 134,224 80,448 59.94%
UBSWDR 36,683 22,927 62.50%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.6% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.6% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The Hang Seng China Enterprises Index is a capitalization-weighted index comprised of state-owned Chinese companies (H-Shares) listed on the Stock Exchange of Hong Kong. The base value of this index is 2000 as of January 3, 2000. The Stock Exchange of Hong Kong has all proprietary rights with repect to the index. In no way the Stock Exchange of Hong Kong endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. The Stock Exchange of Hong Kong disclaims any liability for the issue and offering of the shares of this undertaking for collective investment. The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service.
Name Maximum management fee Horizon-Access India Fund-Classic Shares 1,60
KBC Equity Fund-New Asia-Classic Shares 1,60
KBC Equity Fund-New Asia-Institutional B Shares 1,60
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 532.806,48 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ANGANG STEEL COMPANY LTD 'H' HKD 1.839 5,680 1.022,20
BELLE INTERNATIONAL HOLDINGS LTD HKD 223.543 16,820 367.952,21
CHINA CITIC BANK 'H' HKD 1.602.194 4,600 721.235,81
CHINA COMMUNICATIONS & CONSTRUCTION HKD 245.930 7,480 180.018,63
CHINA MERCHANTS BANK CO LTD -H- HKD 415.499 17,100 695.297,14
CHINA NATL. BUILDING MATERIAL -H- HKD 1.081.827 11,340 1.200.536,09
CHINA RAILWAY CONSTRUCTIO-H- HKD 1.241.499 8,810 1.070.352,02
CHINA RAILWAY GROUP LTD -H- HKD 258.000 4,530 114.372,67
CHINA UNICOM HONG KONG LTD HKD 157.992 12,420 192.026,45
ZHAOJIN MINING INDUSTRY LTD HKD 5.177 12,100 6.130,10
ZHUZHOU CSR TIMES ELECTRIC - H HKD 182.005 28,700 511.174,95
ZIJIN MINING GROUP CO -H- HKD 989.514 3,050 295.342,63
Total 9.319.143,52
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FRANCE 2003 2,25% 25/07/2020 EUR 137.000 EUR 199.342,26
FRANCE 2004 1,60% 25/07/2015 EUR 1.637.000 EUR 2.103.548,27
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 212.000 EUR 233.724,06
FRANCE - 04/55 4.00 % 25/04 EUR 814.000 EUR 997.608,28
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 880.000 EUR 986.051,44
FRANCE - 08/14 3.00% 12/07 EUR 1.526.000 EUR 1.616.815,31
NEDERLAND 2005 4% 15/01/37 EUR 2.842.000 EUR 3.890.285,91
Total 10.027.375,53 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Technology
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND TECHNOLOGY
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 27 June 1997 Initial subscription price: 1000 USD Currency: USD Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 126.55 USD Currency: USD
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of companies in the technology sector where conditions are such as to ensure accelerated economic growth in the short or medium term.
RISK CONCENTRATION Shares in the technology sector.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. In Europe the debt crisis continued to rage unabated. Five euro countries needed a bail-out from the European emergency funds. Greece twice reached an agreement during the year with its private sector creditors concerning a rescheduling of its bond debts in their hands. Spain came into the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. Although more jobs have in fact been created than lost in the US since 2010, the rate of employment growth has remained on the low side. And wages increased very little: Household purchasing power consequently rose to only a limited extent and provided little support for economic growth, which remained extremely lacklustre (+2.1% y-o-y in the first three quarters of 2012).
In the EMU real GDP shrank by 0.3% y-o-y. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany fulfilled its traditional role as locomotive of the European economy to a lesser extent than in the recent past. Greater divergence within Europe resulted in a further decline in unemployment in Germany and an alarmingly rapid rise in unemployment in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery. The weak growth in the Old World was also not without its consequences for the export performance of the growth countries. Over the past few years, however, domestic demand (due to a rapidly growing middle class with a high consumption ratio) and inter-regional trade within Asia have played an increasingly important role. The region is better armed to deal with financial crises than it was in the past. Public finances are healthy, the balance of payments is generally neutral (China actually has an astronomical surplus) and the domestic savings buffer is high. Asia’s economic development no longer depends on fickle foreign capital. Thanks to the contribution by the New World the growth of world GDP held up in 2012 (estimated at 2-2.5%). The technology sector largely performed in line with the broader market. There were, however, significant differences in return between the various subsectors. The software sector (45% of the fund) – our most overweight subsector – outperformed the wider technology sector. The technology sector is experiencing a number of structural changes at present, which will have consequences in both the long and the short term. The clearest trend comprises increasing investments in data centres for companies. These relate to ‘cloud computing’, in which applications are managed centrally. Users access these applications via the internet, but the programs themselves are no longer administered locally. Some companies have gone a step further, hiring the software from an external manufacturer. The software supplier (‘SaaS’ or ‘software as a service’) takes care of the operational management and maintenance of the application. Cloud computing has accordingly given the software sector a strong boost. The semiconductor sector (18% of the fund) performed less well than the wider technology sector. At the start of the year we felt reasonably positive about the sector. Stock levels among the main end-customers were clearly bottoming out at that time. Our judgement was based on a resumption in final demand and potential new inventory building in the second half, enabling semiconductor manufacturers to grow appreciably more quickly than their end-customers in 2012. As the year went by and negative signals began to emerge of weak final demand for consumer electronics and industrial infrastructure, it became clear that our assumptions had been overoptimistic and we reduced our position in the semiconductor sector to neutral. The hardware sector ( 35%) performed significantly less well than the wider technology sector. The weak demand for PCs lead logically to disappointing quarterly figures for all PC manufacturers. The launch of Windows 8 did not produce the hoped for bounceback in the sector. Demand for PCs remain strong only in Asia, but this was not sufficient to drag the entire sector along. Smartphones and tablets were the two outstanding growth segments in 2012, but both were dominated by Samsung and Apple. A notable trend here was that both Samsung and Apple increasingly manufactured components internally. Together with SAP and Samsung, Apple (10% of the fund) led the field among the big technology companies. Particularly in the first half the company of the late Steve Jobs performed very strongly. During the last three months the share had to make up ground on concerns over the company's growth prospects.
2.1.8 FUTURE POLICY The US and European barometers measuring confidence among business leaders peaked in spring 2011 at record levels but have slipped over the past 18 months. In the US they have ended up in the twilight zone between recession and expansion. In Europe they are below freezing point. We are expecting US growth to remain positive but modest (around 1.5-2% y-o-y in the coming quarters) as jobs growth remains moderate, pay increases are barely keeping pace with inflation and budgetary policy has now finally (and probably for many years) struck down the path of austerity. The fragile recovery of the housing market and of corporate investment could be sustained. In Europe the budgetary plans, the banks' tighter lending policy and the high level of uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could still see a further contraction in European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified.
Economic growth in Europe will remain below par. There is a greater need for budgetary reform in Europe than in the US, while monetary policy is less aggressive and banks' lending policy more restrictive. The euro crisis has led the European banks to adopt a tough stance on lending. In contrast, real wage rises (however limited) will be somewhat higher in Europe than in the US. Today's world is at any event one of two speeds. The mature industrialised economies (US, Europe, Japan) still find themselves in a low-growth environment, with no underlying inflationary pressure, persistently low interest rates and runaway public finances. The picture in the New World is altogether different. The strong economic growth has already created inflationary pressure in Asia. Monetary policy consequently has to steer a more cautious course, alternating between restrictive (as in 2011) and expansionary (as at present). Monetary policy in China and elsewhere in Asia is therefore highly alert to and aimed at the avoidance of asset inflation. Not just interest rates are being used for this purpose; there is also active intervention in the credit market and the currency market. This cautious policy is bearing fruit. The rate of increase in the money supply in China has already slowed considerably, to match the rate of nominal GDP growth. Inflation has fallen from 6.5% in September 2011 to 2.1% in November 2012. The risk of overheating therefore appears under control. During a period in which a change in leadership of the Chinese Communist Party will be installed, little will be left to chance and economic growth will be barely lower than in previous years. One of the major challenges for this decade will be the further development of consumption in China and the rest of Asia. That could help bring about a more balanced economic world order: it will not only reduce the region’s dependence on exports but, at least as importantly, will have an effect on international capital flows. More consumption in China will mean lower savings and higher imports, including from the US. That will help the West to ‘grow out’ of its debt problems. In our share selection we are guided by three major developments that ensure strong structural growth. Mobility is driving the development and sale of smart phones and tablet PCs. The digital living room is introducing all sorts of new applications in the home. Cloud computing (see above) allows companies to outsource the management of applications more easily. All these factors are leading to an exponential growth in data traffic. This is leading to additional investment in support IT infrastructure such as storage systems, servers and network equipment. Uncertainty over the macroeconomic environment could temporarily put a spoke in the wheel, but the structural growth engines are very strong. The subsectors best positioned to benefit from these trends are the software and Internet sectors, which therefore remain our preferred selections. We have a particularly soft spot for the Internet sector. This will continue to deliver the fastest turnover growth and highest margins. We have become more positive about the semiconductor sector. We continue to believe that the fundamentals of the sector will improve as the year progresses, but the recovery is likely to be gradual. In our share selection we are opting for companies with specific product cycles and companies that will benefit from an upturn in economic growth. Our least favourite subsector is hardware. Even so, we are expecting improvement too here in the second half. The launch of Windows 8 in combination with ultrabooks (i.e. very slim laptops) could boost the demand for PCs. The advent of tablets and smart phones as an alternative to the traditional PC does however remain a threat in the longer term, and demand also remains weak in the short term. Apart from (5% of the fund) and Apple (10% of the fund) we are avoiding consumer electronics in our portfolio. We see more opportunities in the corporate market, but our preference remains for the software producers. With regard to regional allocation we clearly preferred the US to Europe. Japanese companies are not benefiting enough from the structural growth factors and are moreover expensively priced. Asia is also underweighted. Companies from this region are largely production companies that manufacture consumer electronics (such as smart phones, PCs and printers) on behalf of mostly American companies (such as Apple). These companies operate at very low margins and are moreover involved in a fierce competitive battle.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 447.977.748,30 132.807.216,93
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 632.775,43 6.127.995,61 C. Shares and similar instruments a) Shares 433.679.085,21 131.104.376,27 Of which securities lent 582.777,98 6.722.566,35
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 167.954,99 2.363,52 b) Tax assets 2.307,20 2.271,85 B. Payables a) Accounts payable (-) -122.396,03 -98.686,27 d) Collateral (-) -632.775,43 -6.127.995,61
V. Deposits and cash at bank and in hand A. Demand balances at banks 14.878.664,32 2.032.462,00
VI. Accruals and deferrals A. Expense to be carried forward 6.680,20 B. Accrued income 24.115,36 58.887,05 C. Accrued expense (-) -651.982,75 -301.137,69
TOTAL SHAREHOLDERS' EQUITY 447.977.748,30 132.807.216,93
A. Capital 391.986.212,95 88.455.949,82
B. Income equalization -485.653,43 1.054.111,17
C. Profit(Loss) carried forward 44.351.267,11 50.550.276,63
D. Result for the period 12.125.921,67 -7.253.120,69
IX Financial instruments lent 582.777,98 6.722.566,35
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 13.045.451,82 -5.092.944,45 E. Open-end undertakings for collective investment 66,84 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 592.970,98 24.689,50
II. Investment income and expenses A. Dividends 3.869.750,11 1.699.579,08 B. Interests a) Securities and money market instruments 123.420,15 128.822,49 b) Cash at bank and in hand and deposits 24.294,00 13.580,72 C. Interest on borrowings (-) -4.994,87 -4.629,88
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
1.448.495,54 25.578,93
B. Other 171.864,74
IV. Operating expenses A. Investment transaction and delivery costs (-) -1.057.903,56 -642.246,60 B. Financial expenses (-) -4.019,79 -9.895,76 C. Custodian's fee (-) -108.887,37 -177.062,72 D. Manager's fee (-) a) Financial management Classic Shares -1.286.358,57 -2.469.329,11 Institutional B Shares -3.695.700,96 -83.821,93 b) Administration and accounting management -357.016,06 -178.390,13 F. Formation and organisation expenses (-) -34.188,15 -421.748,67 G. Remuneration, social security charges and
pension -26,26 -36,77
H. Services and sundry goods (-) -49.811,17 -44.257,21 J. Taxes Classic Shares -78.941,56 -112.735,06 Institutional B Shares -41.633,97 40.601,88 K. Other expenses (-) -258.978,64 -120.806,58
Income and expenditure for the period Subtotal II + III + IV -1.512.501,13 -2.184.932,58
V. Profit (loss) on ordinary activities before tax 12.125.921,67 -7.253.120,69
VII. Result for the period 12.125.921,67 -7.253.120,69
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 55.991.535,35 44.351.267,11 Profit (loss) brought forward from the previous
financial year 44.351.267,11 50.550.276,63
Profit for the period available for appropriation 12.125.921,67 -7.253.120,69 Income on the creation of shares (income on the
cancellation of shares) -485.653,43 1.054.111,17
II. (Appropriations to) Deductions from capital -55.991.535,35
III. Profit (loss) to be carried forward 44.351.267,11
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND TECHNOLOGY
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Austria
AMS AG - 40.471,00 CHF 98,000 4.332.932,31 1,00 0,97
Belgium
REALDOLMEN STRIP-VVPR 9,00 EUR 0,001 0,01
Bermuda
DIGITAL CHINA HOLDINGS LTD - 694.000,00 HKD 13,220 1.183.702,24 0,27 0,26
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND TECHNOLOGY (IN
THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 327.219.612,33 343.839.368,73 671.058.981,06 Sales 148.432.772,86 234.092.843,32 382.525.616,18 Total 1 475.652.385,18 577.932.212,05 1.053.584.597,23 Subscriptions 256.408.686,45 309.547.049,20 565.955.735,65 Redemptions 75.782.307,14 186.217.600,87 261.999.908,01 Total 2 332.190.993,59 495.764.650,07 827.955.643,66 Monthly average of total assets
286.794.132,24 427.698.992,32 357.246.562,28
Turnover rate 50,02 % 19,21 % 63,16 %
1st half of year 2nd half of year YearPurchases 327.219.612,33 343.839.368,73 671.058.981,06 Sales 148.432.772,86 234.092.843,32 382.525.616,18 Total 1 475.652.385,18 577.932.212,05 1.053.584.597,23 Subscriptions 256.408.686,45 309.547.049,20 565.955.735,65 Redemptions 75.782.307,14 186.217.600,87 261.999.908,01 Total 2 332.190.993,59 495.764.650,07 827.955.643,66 Monthly average of total assets
280.680.449,98 347.226.005,66 309.606.665,53
Corrected turnover rate 51,11 % 23,66 % 72,88 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 479.957,09 632.775,43 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 75.828.598,26 1.949.061,27
2012 - 12 497.504.639,83 230.353.898,36
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 73.806.587,55 132,96
2012 - 12 346.608.783,84 148,33
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6213773508 EUR 8.43% 8.22% 1.08% 0.0356 27/06/1997 -1.87%
CAP BE6213773508 USD 10.12% 5.21% -0.99% 0.0595 27/06/1997 -0.84%
DIV BE6213774514 EUR 8.41% 8.22% 1.08% 0.0356 27/06/1997 -1.81%
DIV BE6213774514 USD 10.10% 5.21% -0.99% 0.0595 27/06/1997 -0.84%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228907521 EUR 8.43% 25/11/2011 14.83%
CAP BE6228907521 USD 10.12% 25/11/2011 13.79%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in USD and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in USD and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.677% Classic Shares Capitalization: 1.669% Institutional B Shares Capitalization: 1.651% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 139,190 84,513 60.72%
CSFBSAS 72,525 40,885 56.37%
DEUTSCHE 9,003 5,094 56.58%
EQ CSA MACQUARIE 23,036 13,674 59.36%
HSBC 2,027 1,014 50.00%
JP MORGAN 59,992 33,429 55.72%
MERRILL 32,052 18,648 58.18%
MORGAN STANLEY 94,470 51,645 54.67%
NOMURA 151,463 66,804 44.11%
SOCGEN 1,060 530 50.00%
UBSWDR 70,982 37,924 53.43%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 113.756,65 USD. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
HEXAGON AB -B- SEK 12.416 163,100 311.284,56
STMICROELECTRONICS NV EUR 38.324 5,368 271.225,51
ZTE CORP -H- HKD 159 13,060 267,91
Total 582.777,98
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FRANCE 2004 1,60% 25/07/2015 EUR 168.000 USD 284.616,63
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 80.000 USD 116.279,93
FRANCE - 08/14 3.00% 12/07 EUR 166.000 USD 231.878,86
Total 632.775,42 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Pharma
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND PHARMA
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 27 February 1998 Initial subscription price: 20000 BEF Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 576.88 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of companies in the pharmaceutical and healthcare sector where conditions are such as to allow accelerated economic growth in the short or medium term.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR KBC Equity Fund Pharma invests worldwide in companies active in all aspects of health care. These are, in the first place, pharmaceutical companies, but also include manufacturers of generic drugs, biotechnology companies, companies active in medical technology (e.g. cardiovascular and orthopaedic technologies) and medical services such as distributors, hospital chains and health insurers. Our preference is for companies which – thanks in some cases to innovation – display above-average growth at an attractive valuation. The healthcare sector (MSCI World Healthcare) performed extremely well throughout the year. The first three quarters were particularly good. Only in the final quarter did the sector mark time somewhat. The good performances are understandable. As a result of the continuing crisis in Europe and the impact this could have on the European and, by extension, world economy, investors have been taking refuge in safe havens: the United States, the emerging markets or the relatively stable healthcare sector.
Resorting to the stable health sector is self-evident. The pharmaceutical industry may have its challenges, but also has the resources to meet them. The most important challenges in the Pharmaceutical sector are: patent expiry, R&D productivity and governmental pressure on the price of medicinal drugs. A number of companies have managed in recent years gradually to build up a pipeline, either by developing drugs themselves, such as GlaxoSmithKline, or by means of takeovers and agreements, such as Bristol Myers Squibb’s ‘String of Pearls’. Others have proved less successful in doing so, but have taken a different tack: buying back their own shares, sometimes in combination with an attractive dividend yield, such as AstraZeneca and Pfizer. The combination of both mechanisms did at least generate some enthusiasm for this subsector. Another subsector that has done extremely well is biotechnology. Here again we see two different approaches. On the one hand, there are the large, mature companies, with an existing franchise at their disposal. As long as the franchise is not under pressure and there are prospects for expanding it, such companies remain highly in vogue. Gilead for example has a strong anti-HIV franchise and also has the potential to become an important player in HCV (Hepatitis C) with still experimental drugs such as GS-7977. On the other hand, emerging Biotech companies have been the subject of greater interest. Initiatives taken in the early 2000s are now beginning to bear fruit. Jetrea (ocriplasmin), manufactured by the Belgian company ThromboGenics, is on the point of being approved for the treatment of eye disorders. This is not the first time that a Belgian biotech product has reached the market, but it is a first that this is being done by an independent, listed company. In the past Belgian biotech companies were taken over before they reach the finishing line. An example is Tibotec, now the main J&J research hub and the originator of a wide range of drugs for the treatment of HIV. This indicates that a good pipeline turns a biotech company into an interesting prey. In the US and Europe alone takeovers totalling 25 bn USD (source: Bloomberg) have already been announced in the first half of this year. The excellent performance of the biotech sector is therefore not surprising. One subsector that was clearly doing less well is the highly diverse Healthcare Equipment. Try as it might, the sector was unable to shake off the various ills that have been plaguing it for some time: the general lack of innovation, lack of pricing power and the fact that it is a target for governments and/or clients that are cutting back. The small Dental Implants subsector, for example, is closely tied to customers' discretionary spending. In a weak economic climate, this is one of the first things to go. This has resulted in unprecedentedly low valuations for the sector – lower even than in the crisis year of 2008. The orthopaedic and cardiovascular players are more defensive in nature, but here too the sector faces a highly unfavourable combination of circumstances, which has been persisting for some years: no innovation and no pricing power. The utilisation rate has however stopped slowing and there are signs of stabilisation. One subsector that has performed well is (medical) Services. Particularly prominent were the Managed Care companies, i.e. the American commercial health insurers. One of the implications of Obamacare has been the obligatory individual mandate, under which young and healthy customers are required to take out health insurance so as to make the extension of healthcare to other customers affordable: health insurers are obliged to include children living at home at the age of 26 in their parents' 'Health plans'. Similarly, they are no longer permitted to refuse insurance to people on account of their previous medical history. It used to be the case that customers with a chronic disorder were no longer able to take out a new contract when their old one expired other than on onerous and, for most people, unaffordable terms. During the first half of the year there was the idle hope that the US Supreme Court might declare the 'individual mandate' unconstitutional, thereby, according to the most pessimistic observers, undermining Obamacare as a whole. The collapse of Obamacare was regarded as positive for the Managed Care organisations. It patently failed; Obamacare remained intact. By the last quarter of the re-election of President Obama was an important element, with exactly the same argumentation. Opponents of Obamacare hoped for a defeat. And then right at the end of the year the fiscal cliff hung over everything. This came down to the fact that in the event of unchanged policies, the US government would exceed its debt ceiling, after which a number of automatic measures would come into operation, in the form of higher taxes and automatic spending cuts. One of the government's most important expenditure items is healthcare, via Medicare and Medicaid. These measures would have hit hospitals and users of medical services seriously. The fiscal cliff was narrowly avoided.
2.1.8 FUTURE POLICY During the period ahead we think it remains advisable to seek out safe places, for example in healthcare. The 'euro' crisis has still not been resolved and some observers see the first signs that the malaise is spreading to the economically strong euro countries. But we should also not be blind to the new challenges that are looming in the healthcare sector. A US survey commissioned by the government indicates that the costs of healthcare have been rising by nearly 4% a year and, given unchanged policies, will continue to do so in the coming years, with an outlier in 2014, when the costs of healthcare will rise by over 7% as Obamacare comes fully on stream. By 2017 healthcare in the US will cost a mind-boggling 20% of GNP. Needless to say, measures are being planned to curb the rising costs in the US. The utilisation rate in the hospital sector has stabilised. If matters depended solely on the economy the rate would remain unchanged, but as soon as access to the health sector improves we see a rise in the utilisation rate. We expect that from this point onwards the upturn in the hospital sector will be anticipated by a stronger than usual performance by hospitals. On the Equipment side we can only see further gloom and doom; as noted previously, the costs are going through the roof and measures must be taken to bring costs down. Equipment is particularly sensitive to such measures. As long as they are unable to innovate and/or cut costs, they will remain the target of any cost-sensitive player. The Pharmaceutical sector also needs to be on its guard. It is in good shape and has a number of strong points, such as the dividend yield and traditional share buybacks. But it needs to keep a close watch on the situation in the periphery of Europe. Spared to some extent from most of these tribulations is Biotechnology, especially emerging biotechnology. There has been a flood of new drugs that are on the point of approval, even for conditions for which it has so far been notoriously difficult to get anything approved. The prime example is obesity products. The fact that Arena’s small molecule drug lorcaserin was approved for obesity was a breakthrough. It has been 13 years since anything was approved for this condition. But the drug also has its issues, as it is a ‘Fen-Phen’ derivative. ‘Fen-Phen’ or fenfluramine and dexfenfluramine was a weight-loss drug combination that was extraordinarily popular in the 1990s. The drug turned out, however, also to cause serious heart-valve damage. The fact that lorcaserin was associated with carcinogenicity, albeit only among rats, was also not exactly encouraging. Nevertheless, here we are in 2012 and the drug has been approved, despite its modest efficacy – an illustration of the present benevolence of the FDA. As such it is not surprising that we have long regarded biotechnology as a must have in any dynamic portfolio. We have a special interest in Belgian biotechnology. We are without risk of exaggeration one of the most important regions of Europe, with successes that have so far tended to remain obscured behind bigger multinationals, but which thanks to Thrombogenics now have a formidable banner. The IP tax shelter, the experience of the top people in the sector and the visible successes will continue to attract attention, not just on the part of investors but also on the part of new companies seeking a foothold in Europe. Belgium has it all: venture capital, which just needs to be winkled out from savers and unduly cautious investors, the scientists, the experience and a government that remains supportive.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 214.961.290,23 133.073.757,97
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 3.227.304,03 1.068.006,72 C. Shares and similar instruments a) Shares 213.464.250,23 130.751.677,25 Of which securities lent 2.644.443,18 1.144.974,80 b) Closed-end undertakings for collective
investment 1.301.017,20
D. Other securities 9.833,10 14.784,16
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 9.770,36 913.304,38 b) Tax assets 4.934,50 11.930,08 B. Payables a) Accounts payable (-) -109.623,25 -1.064.916,80 c) Borrowings (-) -6.545,39 -850.042,28 d) Collateral (-) -3.227.304,03 -1.068.006,72
V. Deposits and cash at bank and in hand A. Demand balances at banks 1.542.265,17 2.024.479,85
VI. Accruals and deferrals A. Expense to be carried forward 3.067,22 B. Accrued income 308.575,84 158.254,62 C. Accrued expense (-) -262.170,33 -189.797,71
TOTAL SHAREHOLDERS' EQUITY 214.961.290,23 133.073.757,97
A. Capital 143.798.033,44 85.110.287,72
B. Income equalization 263.246,25 -180.812,06
C. Profit(Loss) carried forward 47.908.533,10 44.408.731,04
D. Result for the period 22.991.477,44 3.735.551,27
IX Financial instruments lent 2.644.443,18 1.144.974,80
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments b) Other debt instruments b1 With embedded derivative financial
instruments 34.016,36
C. Shares and similar instruments a) Shares 27.000.072,52 -1.014.041,70 b) Closed-end undertakings for collective
investment 27.878,94 49.562,56
D. Other securities 3.304,84 191.358,58 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -4.800.435,50 4.331.048,94
II. Investment income and expenses A. Dividends 3.848.412,40 2.349.388,74 B. Interests a) Securities and money market instruments 60.109,46 58.547,40 b) Cash at bank and in hand and deposits 3.499,43 6.406,16 C. Interest on borrowings (-) -2.857,95 -5.378,28
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
583.032,84 29.143,66
B. Other 15.695,44
IV. Operating expenses A. Investment transaction and delivery costs (-) -630.431,17 -366.106,86 B. Financial expenses (-) -2.693,30 -5.885,96 C. Custodian's fee (-) -107.763,46 -80.917,47 D. Manager's fee (-) a) Financial management Classic Shares -1.002.098,34 -1.504.233,31 Institutional B Shares -1.590.730,69 -64.336,39 b) Administration and accounting management -184.085,91 -123.422,05 E. Administrative expenses (-) -142,99 -151,75 F. Formation and organisation expenses (-) -13.417,64 -11.159,19 G. Remuneration, social security charges and
pension -12,48 -22,96
H. Services and sundry goods (-) -27.653,57 -21.997,31 J. Taxes Classic Shares -56.323,91 -96.402,75 Institutional B Shares -18.137,86 27.355,61 K. Other expenses (-) -98.048,22 -62.916,20
Income and expenditure for the period Subtotal II + III + IV 760.656,64 143.606,53
V. Profit (loss) on ordinary activities before tax 22.991.477,44 3.735.551,27
VII. Result for the period 22.991.477,44 3.735.551,27
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 71.163.256,79 47.963.470,25 Profit (loss) brought forward from the previous
financial year 47.908.533,10 44.408.731,04
Profit for the period available for appropriation 22.991.477,44 3.735.551,27 Income on the creation of shares (income on the
cancellation of shares) 263.246,25 -180.812,06
II. (Appropriations to) Deductions from capital -71.104.790,83
III. Profit (loss) to be carried forward 47.908.533,10
IV. (Dividends to be paid out) -58.465,96 -54.937,15
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND PHARMA
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND PHARMA (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 217.381.569,52 126.891.781,41 344.273.350,93 Sales 180.077.988,08 105.424.973,79 285.502.961,87 Total 1 397.459.557,60 232.316.755,20 629.776.312,80 Subscriptions 110.788.640,55 92.832.286,10 203.620.926,65 Redemptions 73.596.739,67 71.128.670,33 144.725.410,00 Total 2 184.385.380,22 163.960.956,43 348.346.336,65 Monthly average of total assets
151.031.944,60 222.724.662,20 186.878.303,39
Turnover rate 141,08 % 30,69 % 150,60 %
1st half of year 2nd half of year YearPurchases 217.381.569,52 126.891.781,41 344.273.350,93 Sales 180.077.988,08 105.424.973,79 285.502.961,87 Total 1 397.459.557,60 232.316.755,20 629.776.312,80 Subscriptions 110.788.640,55 92.832.286,10 203.620.926,65 Redemptions 73.596.739,67 71.128.670,33 144.725.410,00 Total 2 184.385.380,22 163.960.956,43 348.346.336,65 Monthly average of total assets
149.946.641,37 217.596.609,05 184.022.948,86
Corrected turnover rate 142,10 % 31,41 % 152,93 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 3.227.304,03 3.227.304,03 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 57.719.013,38 1.220.322,15
2012 - 12 191.971.942,13 120.843.471,01
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 61.143.883,29 647,42
2012 - 12 144.898.979,82 747,25
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0166584350 EUR 14.33% 9.45% 4.09% 0.0301 27/02/1998 2.73%
DIV BE0166585365 EUR 14.33% 9.47% 4.10% 0.03 27/02/1998 2.72%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228903488 EUR 14.33% 25/11/2011 25.42%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 2.50 EUR net (3.33 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.661% Classic Shares Capitalization: 1.667% Institutional B Shares Capitalization: 1.662% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 66,575 41,822 62.82%
CSFBSAS 64,586 38,617 59.79%
DEUTSCHE 6,654 3,632 54.58%
EQ CSA MACQUARIE 4,271 2,441 57.14%
HSBC 12,352 6,543 52.97%
JP MORGAN 19,904 11,058 55.56%
MERRILL 6,117 3,771 61.66%
MORGAN STANLEY 118,340 71,601 60.50%
NOMURA 62,129 36,493 58.74%
SOCGEN 1,247 623 50.00%
UBSWDR 49,522 26,601 53.72%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 55.079,39 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
FRANCE 2003 2,25% 25/07/2020 EUR 62.000 EUR 90.213,29
OAT FRANCE 2003 4% 25/04/14 EUR 236.000 EUR 254.812,27
FRANCE 2004 1,60% 25/07/2015 EUR 246.000 EUR 316.110,49
Total 3.227.304,03 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Telecom
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND TELECOM
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 30 April 1998 Initial subscription price: 20000 BEF Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 235.62 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of companies in the telecommunication sector where conditions are such as to allow accelerated economic growth in the short or medium term.
RISK CONCENTRATION Shares in the telecommunication sector.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. In Europe the debt crisis continued to rage unabated. Five euro countries needed a bail-out from the European emergency funds. Greece twice reached an agreement during the year with its private sector creditors concerning a rescheduling of its bond debts in their hands. Spain came into the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. Although more jobs have in fact been created than lost in the US since 2010, the rate of employment growth has remained on the low side. And wages increased very little: Household purchasing power consequently rose to only a limited extent and provided little support for economic growth, which remained extremely lacklustre (+2.1% y-o-y in the first three quarters of 2012).
In the EMU real GDP shrank by 0.3% y-o-y. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany fulfilled its traditional role as locomotive of the European economy to a lesser extent than in the recent past. Greater divergence within Europe resulted in a further decline in unemployment in Germany and an alarmingly rapid rise in unemployment in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery. The weak growth in the Old World was also not without its consequences for the export performance of the growth countries. Over the past few years, however, domestic demand (due to a rapidly growing middle class with a high consumption ratio) and inter-regional trade within Asia have played an increasingly important role. The region is better armed to deal with financial crises than it was in the past. Public finances are healthy, the balance of payments is generally neutral (China actually has an astronomical surplus) and the domestic savings buffer is high. Asia’s economic development no longer depends on fickle foreign capital. Thanks to the contribution by the New World the growth of world GDP held up in 2012 (estimated at 2-2.5%). Telecoms – traditionally regarded as a defensive sector – performed less well than the wider market. In 2011 the sector was still in favour with investors on account of the high and stable dividend paid by telecom companies. The auction for new licences only attracted rather modest interest, so they could be obtained at a reasonable price. As a result, telecoms was one of the better performing sectors in 2011. It was however far from all moonshine and roses. Anyone who took a close look at the quarterly figures for Europe’s telecom sector quickly spotted several worrying trends. 2012 was the year in which these trends became clearly confirmed. Pricing pressure and government regulation weighed on the sector and were insufficiently compensated for by price elasticity. Broadband (internet via DSL) had virtually ceased to grow and was, moreover, experiencing intense competition from the cable sector. The fund was and is overweight in cable companies at the expense of traditional telecom operators. Mobile data traffic remains the sector’s only growth driver. The increasing popularity of smartphones and tablets offered operators the opportunity to sell additional data packages to their customers. That was good news for the operators: the sector had finally discovered a promising new product category. These positive effects were particularly discernible among the US operators. In the case of a European colleagues, mobile Internet proved to be a double-edged sword for the sector. First of all, applications like ‘WhatsApp’ (messenger service for smartphones) enabled consumers to reduce their telecom bills by using mobile internet services to communicate instead of ‘traditional’ mobile phone and text messaging services. Revenues from mobile data packages were not therefore simply an add-on to those generated by conventional telephony (speech and text messages). Operators responded by offering more bundled products, thereby limiting the risk to some extent. A second effect of smartphones was the sharp rise in subsidies offered by operators. This weighed on the sector’s margins. What’s more, growth in internet traffic is stronger than the growth in revenues generated through mobile data services. This can lead over time to extra investment in the underlying infrastructure, which could in turn depress sector cash flows. The effects of the negative factors as described above began to weigh on cash flows and it rapidly became clear that the generous dividend policy was no longer sustainable. Telefonica, Telecom Austria, France Telecom, Telecom Italia, KPN… all had to cut their dividends. This eliminated the most important reason for being overweight in the sector, namely a high and stable dividend. Investors accordingly left the sector to one side in 2012. The strongest performances were recorded by the smaller operators that are acting as price-cutters. Jazztel in Spain and Iliad in France performed equally as well as the cable companies (Ziggo, Telenet, Kabel Deutschland). In Asia the growing use of smart phones is providing a strong growth engine in such markets as Hong Kong and Taiwan, while the strong growth in disposable income is leading to a growing demand for telecom services in China, India and Thailand.
News in the United States was dominated by AT&T’s possible acquisition of T-Mobile USA, which would have consolidated the market down to three major players: AT&T, Verizon and Sprint. The deal was blocked, however, by the US government. Subsequently T-Mobile USA sought a merger with the smaller MetroPcs. Verizon strengthened its position by buying up spectrum from the US cable sector and then signing a far-reaching collaboration agreement with the same cable companies.
2.1.8 FUTURE POLICY The US and European barometers measuring confidence among business leaders peaked in spring 2011 at record levels but have slipped over the past 18 months. In the US they have ended up in the twilight zone between recession and expansion. In Europe they are below freezing point. We are expecting US growth to remain positive but modest (around 1.5-2% y-o-y in the coming quarters) as jobs growth remains moderate, pay increases are barely keeping pace with inflation and budgetary policy has now finally (and probably for many years) struck down the path of austerity. The fragile recovery of the housing market and of corporate investment could be sustained. In Europe the budgetary plans, the banks' tighter lending policy and the high level of uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could still see a further contraction in European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified. Economic growth in Europe will remain below par. There is a greater need for budgetary reform in Europe than in the US, while monetary policy is less aggressive and banks' lending policy more restrictive. The euro crisis has led the European banks to adopt a tough stance on lending. In contrast, real wage rises (however limited) will be somewhat higher in Europe than in the US. Today's world is at any event one of two speeds. The mature industrialised economies (US, Europe, Japan) still find themselves in a low-growth environment, with no underlying inflationary pressure, persistently low interest rates and runaway public finances. The picture in the New World is altogether different. The strong economic growth has already created inflationary pressure in Asia. Monetary policy consequently has to steer a more cautious course, alternating between restrictive (as in 2011) and expansionary (as at present). Monetary policy in China and elsewhere in Asia is therefore highly alert to and aimed at the avoidance of asset inflation. Not just interest rates are being used for this purpose; there is also active intervention in the credit market and the currency market. This cautious policy is bearing fruit. The rate of increase in the money supply in China has already slowed considerably, to match the rate of nominal GDP growth. Inflation has fallen from 6.5% in September 2011 to 2.1% in November 2012. The risk of overheating therefore appears under control. During a period in which a change in leadership of the Chinese Communist Party will be installed, little will be left to chance and economic growth will be barely lower than in previous years. One of the major challenges for this decade will be the further development of consumption in China and the rest of Asia. That could help bring about a more balanced economic world order: it will not only reduce the region’s dependence on exports but, at least as importantly, will have an effect on international capital flows. More consumption in China will mean lower savings and higher imports, including from the US. That will help the West to ‘grow out’ of its debt problems. Within the fund we are more positive about telecommunications equipment (25% of the fund) than Telecom operators (75% of the fund). We remain wary about the telecom sector in 2013. The sector may be cheaply priced, but we do not see any reason for a revaluation. All the structural problems discussed above have certainly not yet been resolved. Particularly in the case of mobile operators we do not see any signs of improvement. In the case of fixed line telephony there appears to be a relaxation of the regulations for the first time in years on condition that the operators invest in optical fibre. This will in due course provide room for price increases, but capital investment will need to rise first. We will start to see this effect from 2013 onwards. We continue to regard the cable sector as a better alternative with superior growth prospects.
In the United States, we prefer infrastructure companies to the telecom operators. We identify two attractive segments within the telecom infrastructure segment: operators of mobile phone masts (tower companies) and data centre operators. Both segments offer excellent visibility (long-term contracts) and recurring income. What’s more, both segments possess sufficient pricing power to impose annual price increases. We are less positive about the traditional telecom operators (such as AT&T and Verizon) on account of their higher valuation. We are negative toward the Latin American telecoms market because of tighter regulation and increased price competition. Asia is the strongest growth market. The most attractive markets are China (a combination of strong growth and low prices) and Thailand (absence of domestic competition). Our preference within the technology component of our portfolio (telecom equipment, approximately 25% of the portfolio) is for companies focusing on data centre gear (cloud computing). We are more positive about capital spending by telecom operators in 2013. The stiff price pressure and growing competition from China are however throwing a spoke in the wheel. The market for smartphones appears increasingly concentrated around Samsung Electronics and Apple. We are once again expecting a strong year for smartphones and tablets in 2013.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 77.593.118,68 139.250.205,96
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 2.473.425,29 5.288.853,79 C. Shares and similar instruments a) Shares 75.010.707,55 137.024.802,32 Of which securities lent 2.278.684,89 5.667.688,12
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 4.841,68 1.276.824,94 b) Tax assets 9.483,55 9.672,25 B. Payables a) Accounts payable (-) -59.693,01 -1.432.407,52 c) Borrowings (-) -331.575,39 d) Collateral (-) -2.473.425,29 -5.288.853,79
V. Deposits and cash at bank and in hand A. Demand balances at banks 2.574.228,20 2.066.552,30
VI. Accruals and deferrals A. Expense to be carried forward 2.607,18 B. Accrued income 175.215,06 913.889,26 C. Accrued expense (-) -121.664,36 -280.159,38
TOTAL SHAREHOLDERS' EQUITY 77.593.118,68 139.250.205,96
A. Capital 66.723.983,66 132.537.578,44
B. Income equalization 670.384,72 -2.175.451,14
C. Profit(Loss) carried forward 6.409.472,30 13.705.112,05
D. Result for the period 3.789.278,00 -4.817.033,39
IX Financial instruments lent 2.278.684,89 5.667.688,12
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 7.427.619,68 -13.417.105,39 D. Other securities -832.426,00 G. Receivables, deposits, cash at bank and in hand
and payables 0,01
H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -4.317.888,67 6.586.526,81
II. Investment income and expenses A. Dividends 1.795.333,56 5.329.417,41 B. Interests a) Securities and money market instruments 47.984,15 48.605,92 b) Cash at bank and in hand and deposits 4.231,40 14.588,46 C. Interest on borrowings (-) -5.545,68 -6.967,83
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
444.486,52 43.942,27
B. Other 3.652,01
IV. Operating expenses A. Investment transaction and delivery costs (-) -318.842,67 -445.771,37 B. Financial expenses (-) -1.430,13 -8.259,66 C. Custodian's fee (-) -111.921,88 -63.480,18 D. Manager's fee (-) a) Financial management Classic Shares -274.790,82 -1.548.069,25 Institutional B Shares -730.487,92 -112.925,53 b) Administration and accounting management -70.320,62 -126.467,38 E. Administrative expenses (-) -301,35 -104,72 F. Formation and organisation expenses (-) -7.580,53 -99.243,29 G. Remuneration, social security charges and
pension -29,04
H. Services and sundry goods (-) -14.441,85 -32.382,70 J. Taxes Classic Shares -11.481,28 -100.700,38 Institutional B Shares -7.574,90 53.599,92 K. Other expenses (-) -57.769,01 -103.433,48
Income and expenditure for the period Subtotal II + III + IV 679.546,99 2.845.971,18
V. Profit (loss) on ordinary activities before tax 3.789.278,00 -4.817.033,39
VII. Result for the period 3.789.278,00 -4.817.033,39
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 10.869.135,02 6.712.627,52 Profit (loss) brought forward from the previous
financial year 6.409.472,30 13.705.112,05
Profit for the period available for appropriation 3.789.278,00 -4.817.033,39 Income on the creation of shares (income on the
cancellation of shares) 670.384,72 -2.175.451,14
II. (Appropriations to) Deductions from capital -10.826.472,32
III. Profit (loss) to be carried forward 6.409.472,30
IV. (Dividends to be paid out) -42.662,70 -303.155,22
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND TELECOM
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND TELECOM (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 51.077.273,05 59.467.822,79 110.545.095,84 Sales 148.149.308,26 26.978.356,70 175.127.664,96 Total 1 199.226.581,31 86.446.179,48 285.672.760,80 Subscriptions 62.402.153,38 66.355.167,07 128.757.320,45 Redemptions 161.641.261,34 32.866.082,23 194.507.343,57 Total 2 224.043.414,72 99.221.249,30 323.264.664,02 Monthly average of total assets
72.494.780,07 72.648.505,17 72.571.642,62
Turnover rate -34,23 % -17,58 % -51,80 %
1st half of year 2nd half of year YearPurchases 51.077.273,05 59.467.822,79 110.545.095,84 Sales 148.149.308,26 26.978.356,70 175.127.664,96 Total 1 199.226.581,31 86.446.179,48 285.672.760,80 Subscriptions 62.402.153,38 66.355.167,07 128.757.320,45 Redemptions 161.641.261,34 32.866.082,23 194.507.343,57 Total 2 224.043.414,72 99.221.249,30 323.264.664,02 Monthly average of total assets
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 2.473.425,29 2.473.425,29 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 103.999.184,96 4.526.088,99
2012 - 12 118.430.353,45 161.799.587,55
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 103.779.528,82 254,38
2012 - 12 62.525.633,16 276,92
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0167421966 EUR 7.98% 6.74% -2.77% 0.024 30/04/1998 -3.95%
DIV BE0167422972 EUR 7.99% 6.75% -2.77% 0.024 30/04/1998 -3.96%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228908537 EUR 7.97% 25/11/2011 14.94%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares
The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 2.59 EUR net (3.45 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.773% Classic Shares Capitalization: 1.865% Institutional B Shares Capitalization: 1.773% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 50,329 31,021 61.64%
CSFBSAS 26,250 15,046 57.32%
DEUTSCHE 2,550 1,439 56.42%
EQ CSA MACQUARIE 2,283 1,409 61.73%
HSBC 326 173 53.13%
JP MORGAN 7,383 4,153 56.25%
MERRILL 23,718 13,937 58.76%
MORGAN STANLEY 17,721 10,174 57.41%
NOMURA 44,656 26,385 59.09%
SOCGEN 440 195 44.44%
UBSWDR 37,944 22,890 60.33%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 51.749,85 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
BYD CO LTD -H- HKD 599 23,250 1.362,87
CHINA UNICOM HONG KONG LTD HKD 326.999 12,420 397.440,73
PCCW LTD HKD 682.999 3,400 227.249,71
SOFTBANK CORP JPY 60.000 3140,000 1.652.631,58
Total 2.278.684,89
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 1.000 EUR 1.221,80
FRANCE - 04/55 4.00 % 25/04 EUR 550.000 EUR 674.059,65
Total 2.473.425,29 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund US Small Caps
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND US SMALL CAPS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 31 July 1998 Initial subscription price: 500 USD Currency: USD Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 853.66 USD Currency: USD
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of American companies that are not included in the S&P 500, since conditions in America are such as to ensure accelerated economic growth in the short or medium term.
RISK CONCENTRATION American shares not included in the S&P 500.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. The debt crisis in Europe continued to rage unabated. Five euro countries have already needed a bailout from the European emergency fund. Greece twice reached an agreement during the year with its private sector creditors on restructuring the bond debt it owes them. Spain found itself in the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. Although more jobs have been created than lost in the US since 2010, the rate of employment growth has remained on the low side. Pay also increased very little. Household purchasing power consequently hardly rose and provided little support for economic growth, which remained extremely lacklustre (+2.1% y-o-y in the first three quarters of 2012).
On top of that, the budgetary debate became mired in a total political impasse. The divisions between Republicans and Democrats are considerable and are ideologically driven. Aware of their inability to work out a policy and fearful that the stalemate could lead to an uncontrolled explosion in debt, the parties have passed automatic spending cuts into legislation to reduce the budget deficit to 3% of GDP over a period of ten years. The concrete measures to this end are damaging the priorities of Democrats and Republicans alike. In extremis the retiring Congress decided on New Year's Day to delay automatic spending cuts until 1 March 2013. As far as the performance of the market was concerned, the initial phase of the economic recovery went hand in hand with a fine stock-market rally, resulting in the S&P 500 being 75% higher at the end of April 2010 than its low point on 9 March 2009. Since then, the equity markets have struggled to find fresh impetus. Of the traditional markets, Western Europe (MSCI Europe return index up +18.4% over this period) managed to claw back some of the underperformance that has built up since the start of the euro crisis in autumn 2009. Nevertheless the problems continued to mount in the EMU: they include the Greek debt restructuring, the threat of an extremist separatist party winning the Greek elections, the undercapitalisation of Spanish banks, the referendum in Ireland, and the financial collapse in Cyprus. Evidently the underperformance of European shares over many years has increased the valuation gap with US shares to such an extent that fresh events in the euro crisis have less impact on the trading floor. Wall Street closed the year substantially higher on balance (S&P500: +13.4%, Dow Jones: +7.3%), while European investors also benefited from a small increase in the value of the dollar (return MSCI USA in euros: +13,9%). The index for smaller shares – the S&P 600 – did just a little better at 14.8%, denominated in USD.
2.1.8 FUTURE POLICY The US and European barometers measuring confidence among business leaders peaked in spring 2011 at record levels, but have slipped over the past 18 months. In the US they have ended up in the twilight zone between recession and expansion. In Europe they are below freezing point. We are consequently expecting US growth to remain positive but modest (around 1.5-2% y-o-y in the coming quarters) as jobs growth remains moderate, pay increases are barely keeping pace with inflation and budgetary policy has now finally (and probably for many years) struck down the path of austerity. The fragile recovery of the housing market and of corporate investment could be sustained. The foundations for more sustainable growth in 2013 and beyond have however been laid in recent years. US households have trimmed back their debt level significantly, the savings rate has already increased considerably and loan servicing (instalments and interest payments combined) now accounts for only 10% of household budgets (the lowest level in fifteen years – it was at 14% three years ago). Households are gradually moving towards a position where they can spend more of their money on consumption. The explosive growth in earnings between 2009 and 2012 bolstered companies’ already substantial cash positions. Investments were scaled back considerably during the crisis, with the foundations being laid for a catch-up process. After much squabbling between the Democrats and Republicans a compromise was after all reached on New Year's Day concerning the most urgent budgetary issues. The agreement creates certainty as to households’ tax position, while the budget deficit is being reduced sharply by a mix of tax increases and spending cuts. The agreement is however insufficient to restore US federal finances to sound health. Further measures are in the offing and a fresh programme of cuts may be expected as early as spring 2013. While that may be regarded as certain, how far the cuts go, what form they take and over what timeframe they will be spread out will need to become clear in the coming months. Lastly, the Fed is continuing to make unprecedented cash injections with its programme for purchasing government bonds and other debt paper. In doing so it wants to avert the risk that the banks will focus unduly on their solvency by insisting on overly strict lending conditions and so undermine economic growth. These cash injections will either find their way into the real economy or generate inflationary expectations. In any case they will keep long rates low and banish any fears of deflation. Our optimism concerning the US market is tempered by the current profit margins which, at least in a historical context, are already at a high level.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 18.362.058,67 19.293.388,63
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 92.520,29 105.263,43 C. Shares and similar instruments a) Shares 18.251.585,59 19.376.490,36
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 20.521,08 283,05 B. Payables a) Accounts payable (-) -54.520,48 -111.706,18 c) Borrowings (-) -80.075,65
V. Deposits and cash at bank and in hand A. Demand balances at banks 63.334,50 9.064,70
VI. Accruals and deferrals A. Expense to be carried forward 225,08 B. Accrued income 6.540,42 15.238,23 C. Accrued expense (-) -17.922,73 -21.394,39
TOTAL SHAREHOLDERS' EQUITY 18.362.058,67 19.293.388,63
A. Capital 15.492.363,76 -19.229.458,64
B. Income equalization 5.317,61 34.882,94
C. Profit(Loss) carried forward 38.232.474,57
D. Result for the period 2.864.377,30 255.489,76
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -14.296,95 5.353,35 C. Shares and similar instruments a) Shares 2.883.388,85 418.934,34 F. Derivative financial instruments l) Financial indices Futures and forward contracts -7.677,00 9.125,00 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 19.936,79 13.833,19
II. Investment income and expenses A. Dividends 280.346,90 215.715,34 B. Interests a) Securities and money market instruments 21.208,97 -2.035,48 b) Cash at bank and in hand and deposits 78,35 175,60 C. Interest on borrowings (-) -857,25 -2.287,63
III. Other income B. Other 14.028,38
IV. Operating expenses A. Investment transaction and delivery costs (-) -2.931,34 -25.302,69 B. Financial expenses (-) -556,02 -2.023,33 C. Custodian's fee (-) -15.496,89 -19.723,42 D. Manager's fee (-) a) Financial management Classic Shares -268.971,86 -317.062,55 b) Administration and accounting management -19.097,07 -23.303,14 E. Administrative expenses (-) -31,38 F. Formation and organisation expenses (-) -1.768,77 -2.633,96 G. Remuneration, social security charges and
pension -5,49
H. Services and sundry goods (-) -4.485,52 -4.590,80 J. Taxes Classic Shares -1.846,49 -15.369,37 K. Other expenses (-) -2.597,40 -7.306,20
Income and expenditure for the period Subtotal II + III + IV -16.974,39 -191.756,12
V. Profit (loss) on ordinary activities before tax 2.864.377,30 255.489,76
VII. Result for the period 2.864.377,30 255.489,76
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 2.869.694,91 38.522.847,27 Profit (loss) brought forward from the previous
financial year 38.232.474,57
Profit for the period available for appropriation 2.864.377,30 255.489,76 Income on the creation of shares (income on the
cancellation of shares) 5.317,61 34.882,94
II. (Appropriations to) Deductions from capital -2.869.694,91
III. Profit (loss) to be carried forward 38.522.847,27
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND US SMALL CAPS
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND US SMALL CAPS (IN
THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 2.995,06 283.908,16 286.903,22 Sales 1.760.213,89 2.555.853,32 4.316.067,21 Total 1 1.763.208,95 2.839.761,48 4.602.970,43 Subscriptions 2.077.335,45 778.807,96 2.856.143,41 Redemptions 3.497.214,74 3.144.351,01 6.641.565,75 Total 2 5.574.550,19 3.923.158,97 9.497.709,16 Monthly average of total assets
20.253.480,99 18.670.681,57 19.462.081,28
Turnover rate -18,82 % -5,80 % -25,15 %
1st half of year 2nd half of year YearPurchases 2.995,06 283.908,16 286.903,22 Sales 1.760.213,89 2.555.853,32 4.316.067,21 Total 1 1.763.208,95 2.839.761,48 4.602.970,43 Subscriptions 2.077.335,45 778.807,96 2.856.143,41 Redemptions 3.497.214,74 3.144.351,01 6.641.565,75 Total 2 5.574.550,19 3.923.158,97 9.497.709,16 Monthly average of total assets
20.319.567,30 18.721.228,49 19.480.771,83
Corrected turnover rate -18,76 % -5,79 % -25,13 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS Nil
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Institutional B Shares Change in number of shares in circulation: Nil Amounts received and paid by the UCI: Nil Net asset value: Nil
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0168342476 EUR 14.30% 16.95% 4.34% 0.0539 31/07/1998 4.18%
CAP BE0168342476 USD 16.08% 13.70% 2.21% 0.0782 31/07/1998 5.53%
DIV BE0168341460 EUR 14.29% 16.95% 4.34% 0.0539 31/07/1998 4.18%
DIV BE0168341460 USD 16.07% 13.70% 2.21% 0.0782 31/07/1998 5.52%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
The cumulative returns are shown where they relate to a period of at least one year.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in USD and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.62% Classic Shares Capitalization: 1.613% Institutional B Shares Capitalization: Not applicable * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
EQ CSA MACQUARIE 439 251 57.14%
MERRILL 104 65 62.49%
MORGAN STANLEY 250 135 53.91%
NOMURA 740 407 55.01%
UBSWDR 201 126 62.50%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to –0,26 USD. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Food & Personal Products
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND FOOD & PERSONAL PRODUCTS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 26 February 1999 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 887.07 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED The assets are for at least 85% invested in shares of companies chiefly from the 1) food retailing, 2) food, beverages and tobacco and 3) household and personal products sectors. As a result, the entire Consumer Staples sector is considered. The regional allocation may change from time to time. In principle, the sub-fund invests worldwide. No more than 15% of the assets are invested in shares from other sectors and other instruments to the extent that they are permitted under the applicable regulations.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. The debt crisis in Europe continued to rage unabated. Five euro countries requested a bailout from the European emergency fund. Greece reached agreements with its private sector creditors on two occasions in the span of one year on restructuring the bond debt it owes them. Spain found itself in the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. More jobs were in fact created than lost in the US since 2010, but the rate of employment growth remained on the low side. Wages also increased very little. Household purchasing power consequently rose to only a limited extent and provided little support for economic growth, which remained extremely lacklustre (+2.1% y-o-y in the first three quarters of 2012). Real GDP in the EMU contracted by an annualised 0.3%. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany played its traditional role as European economic engine to a lesser extent than in the recent past. Greater divergence within Europe resulted primarily in a further decline in unemployment in Germany and an alarmingly rapid rise in unemployment in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery.
The weak growth in the industrialised Western economies was not without its impact on the export performance in emerging countries. In recent years, however, domestic demand (due to a rapidly growing middle class with a high consumption ratio) and inter-regional trade within Asia have been playing an increasingly important role. The region is better armed to deal with financial crises than it was in the past. Public finances are healthy, the balance of payments is generally neutral (China actually has an astronomical surplus) and the internal savings buffer is high. Asia’s economic development no longer depends on fickle foreign capital. Thanks to the contribution by the ‘new world’ the growth of world GDP held up in 2012 (estimated at 2-2.5%).
2.1.8 FUTURE POLICY The US and European barometers measuring confidence among business leaders peaked in spring 2011 at record levels, but have slipped over the past 18 months. In the US they have ended up in the twilight zone between recession and expansion. In Europe they are below freezing point. We are expecting US growth to remain positive but modest (around 1.5-2% y-o-y in the coming quarters) as job growth remains moderate, pay increases are barely keeping pace with inflation and budgetary policy has now finally (and probably for many years) struck down the path of austerity. The fragile recovery of the housing market and of corporate investment could be sustained. In Europe the budgetary plans, tighter lending policy of the banks and major uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could therefore see a contraction of European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified. Economic growth in Europe will remain below par. There is a greater need for budgetary reform in Europe, while monetary policy there is less aggressive and banks' lending policy more restrictive. The euro crisis has led the European banks to adopt a tough stance on lending. In contrast, real wage rises (however limited) will be somewhat higher in Europe than in the US. Today’s world is one of two-speed economies. The mature industrialised economies (US, Europe, Japan) still find themselves in a low-growth environment, with no underlying inflationary pressure, persistently low interest rates and runaway public finances. The picture in the 'new world' is altogether different. The strong economic growth has already created inflationary pressure in Asia. As a result, monetary policy in the region will need to be more cautious, or even restrictive (as in 2011) rather than accommodating (as at present). Monetary policy in China and elsewhere in Asia is therefore primed for adjustment and geared to preventing asset-price inflation. This implies not only adjusting interest rates but also active intervention on the credit and foreign exchange markets. This cautious policy is beginning to bear fruit. In China, the rate of increase in the money supply has already slowed considerably, to match the rate of nominal GDP growth. Inflation fell from 6.5% in September 2011 to 2.1% in November 2012. The risk of overheating therefore appears under control. During a period in which a new leadership of the Chinese Communist Party will be installed, little will be left to chance and economic growth will be barely lower than in previous years. One of the major challenges for this decade will be the further development of consumption in China and the rest of Asia. That could help bring about a more balanced economic world order: it will not only reduce the region’s dependence on exports but, at least as importantly, will have an effect on international capital flows. More consumption in China will mean lower savings and higher imports, including from the US, which will help the West to ‘grow out’ of its debt problems.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 146.183.954,54 88.101.556,60
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 769.872,00 452.160,00 a} Collateral received in the form of bonds 252.249,84 445.956,15 C. Shares and similar instruments a) Shares 145.599.296,69 87.898.165,17 Of which securities lent 233.345,73 741.385,06 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -65.081,72 m) Financial indices Futures and forward contracts (+/-) -11.082,20 7.691,73
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 43.022,77 570.498,74 b) Tax assets 31.713,75 12.541,61 c) Collateral 98.773,62 44.484,72 B. Payables a) Accounts payable (-) -157.637,48 -630.835,72 c) Borrowings (-) -979.369,56 -721.632,14 d) Collateral (-) -252.249,84 -445.956,15
V. Deposits and cash at bank and in hand A. Demand balances at banks 609.852,47 554.677,34
VI. Accruals and deferrals A. Expense to be carried forward 1.638,92 B. Accrued income 382.164,39 126.959,31 C. Accrued expense (-) -202.651,91 -149.711,36
TOTAL SHAREHOLDERS' EQUITY 146.183.954,54 88.101.556,60
A. Capital 102.400.857,57 60.646.382,54
B. Income equalization -207.850,59 -320.511,85
C. Profit(Loss) carried forward 27.431.272,65 23.429.573,53
D. Result for the period 16.559.674,91 4.346.112,38
I.A.B Cash at bank and in hand/deposits 98.773,62 44.484,72
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 987.757,71 444.894,14
III.B Written futures and forward contracts -1.001.201,44
IX Financial instruments lent 233.345,75 741.385,06
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -95.298,00 512,00 C. Shares and similar instruments a) Shares 15.488.021,92 2.297.862,03 D. Other securities -1,35 -1.359,96 F. Derivative financial instruments a) Bonds Futures and forward contracts 987.757,71 l) Financial indices Option contracts 34.248,38 Futures and forward contracts -893.675,27 -545.018,26 H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts 65.081,72 -65.081,72 b) Other foreign exchange positions and
transactions -541.100,68 2.305.507,94
II. Investment income and expenses A. Dividends 4.094.520,47 1.538.871,51 B. Interests a) Securities and money market instruments 194.232,07 30.835,79 b) Cash at bank and in hand and deposits 13.626,90 3.726,23 C. Interest on borrowings (-) -7.431,63 -8.552,18
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
464.052,59 62.914,67
B. Other 94.299,25
IV. Operating expenses A. Investment transaction and delivery costs (-) -670.623,48 -325.187,87 B. Financial expenses (-) -1.763,30 -3.086,39 C. Custodian's fee (-) -72.369,69 -43.768,06 D. Manager's fee (-) a) Financial management Classic Shares -586.798,07 -760.633,11 Institutional B Shares -1.584.077,48 -63.969,13 b) Administration and accounting management -155.822,96 -64.089,60 E. Administrative expenses (-) -83,43 -151,31 F. Formation and organisation expenses (-) -17.406,63 -9.452,92 G. Remuneration, social security charges and
pension -15,32 -10,65
H. Services and sundry goods (-) -24.339,83 -17.733,21 J. Taxes Classic Shares -23.098,01 -47.675,59 Institutional B Shares -13.953,64 19.753,47 K. Other expenses (-) -94.008,08 -52.400,55
Income and expenditure for the period Subtotal II + III + IV 1.514.640,48 353.690,35
V. Profit (loss) on ordinary activities before tax 16.559.674,91 4.346.112,38
VII. Result for the period 16.559.674,91 4.346.112,38
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 43.783.096,97 27.455.174,06 Profit (loss) brought forward from the previous
financial year 27.431.272,65 23.429.573,53
Profit for the period available for appropriation 16.559.674,91 4.346.112,38 Income on the creation of shares (income on the
cancellation of shares) -207.850,59 -320.511,85
II. (Appropriations to) Deductions from capital -43.750.466,63
III. Profit (loss) to be carried forward 27.431.272,65
IV. (Dividends to be paid out) -32.630,34 -23.901,41
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND FOOD & PERSONAL PRODUCTS
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND FOOD & PERSONAL
PRODUCTS (IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 155.999.601,00 114.165.151,91 270.164.752,91 Sales 82.549.981,82 148.006.931,85 230.556.913,67 Total 1 238.549.582,82 262.172.083,76 500.721.666,58 Subscriptions 129.441.709,49 76.944.818,67 206.386.528,16 Redemptions 52.003.659,26 112.436.793,58 164.440.452,84 Total 2 181.445.368,75 189.381.612,25 370.826.981,00 Monthly average of total assets
148.836.339,22 166.311.725,73 157.574.032,47
Turnover rate 38,37 % 43,77 % 82,43 %
1st half of year 2nd half of year YearPurchases 155.999.601,00 114.165.151,91 270.164.752,91 Sales 82.549.981,82 148.006.931,85 230.556.913,67 Total 1 238.549.582,82 262.172.083,76 500.721.666,58 Subscriptions 129.441.709,49 76.944.818,67 206.386.528,16 Redemptions 52.003.659,26 112.436.793,58 164.440.452,84 Total 2 181.445.368,75 189.381.612,25 370.826.981,00 Monthly average of total assets
142.145.754,79 167.042.572,76 158.315.480,67
Corrected turnover rate 40,17 % 43,58 % 82,05 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
Capitalization Distribution Capitalization Distribution
2011 - 12 61.798.780,86 1.085.308,56
2012 - 12 147.794.619,86 107.885.908,00
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 64.039.769,67 967,98
2012 - 12 115.809.390,51 1.077,49
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0170241062 EUR 10.22% 12.98% 6.41% 0.0794 26/02/1999 5.62%
DIV BE0170242078 EUR 10.18% 12.99% 6.41% 0.0793 26/02/1999 5.61%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228545784 EUR 10.25% 25/11/2011 18.29%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 6.28 EUR net (8.37 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.693% Classic Shares Capitalization: 1.664% Institutional B Shares Capitalization: 1.628% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 42,531 25,074 58.95%
CSFBSAS 61,431 32,195 52.41%
DEUTSCHE 6,215 3,136 50.46%
EQ CSA MACQUARIE 4,283 2,537 59.23%
HSBC 6,213 3,022 48.63%
JP MORGAN 36,455 20,253 55.56%
MERRILL 23,396 14,024 59.94%
MORGAN STANLEY 63,622 36,470 57.32%
NOMURA 54,271 28,357 52.25%
SOCGEN 3,891 1,886 48.47%
UBSWDR 80,377 44,436 55.28%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 55.620,61 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
TSINGTAO BREWERY -H- HKD 52.120 45,750 233.345,73
Total 233.345,73
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 20.000 EUR 24.436,08
FRANCE 2004 1,60% 25/07/2015 EUR 10.000 EUR 12.850,02
FRANCE - 04/55 4.00 % 25/04 EUR 169.000 EUR 207.120,15
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 7.000 EUR 7.843,59
Total 252.249,84 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Luxury & Tourism
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND LUXURY & TOURISM
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 25 June 1998 Initial subscription price: 100 EUR Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 90.08 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in share of companies associated with themes such as tourism and leisure and companies in the luxury goods sector.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR KBC Equity Fund Luxury & Tourism invests in shares of companies related to the luxury and tourism industries such as Automobiles, Consumer Durables, Luxury Retail, Personal Products, Recreation, Travel & Accommodation. The fund increased in value over the year and outperformed the broad world market as represented by MSCI World All Countries. Looking back over the past year, 2012 was equally as tumultuous as the previous year. In January equity markets moved considerably higher. The Fed’s announcement that rates will remain low until at least late 2014, record results from Apple and positive US GDP growth numbers were the key support factors for equity markets. Emerging equity markets led the pack early on. After a short pause in early February, equities climbed higher again in the second half of the month. Regionally, the euro area markets strongly outperformed. Positive macroeconomic developments, especially in the US, the successful Greek debt restructuring and the liquidity injection by central banks encouraged a modest increase in equity markets in March. Towards the end of the month investors’ optimism was tempered by worries over the risks for a hard landing in China and the rise in government bond yields throughout the world.
At the start of the second quarter macro data was not supportive for equity markets. The reporting season for the first quarter was a positive factor with some 75% of US companies (S&P 500) beating expectations. In Europe, there were less positive surprises and, disappointingly earnings were down year-on-year. Euro area equity markets strongly underperformed other regions once again, while Emerging market equities also continued to underperform their Developed Market counterparts. The downward trend on stock markets intensified in May. Uncertainty over Greece and Spain continued to weigh on investors' mood in June. The announcement of plans to enable the European Stability Mechanism to directly capitalise banks rather than direct funds through the sovereign led to sharp gains in the final trading days of the month. European stock markets benefited most from the late rally, strongly outperforming other regions. During July, economic data remained weak for most regions. At the start of July, the IMF reduced its outlook on US economic growth for 2012 and 2013 due to a slowdown in consumer spending and economic demand. Despite the weak economic releases during the month, the ECB stepped in at month end to awaken global markets. August marked a month of improvement in equities after reassurances from both the ECB and the Fed. Greece’s credit rating outlook was lowered further by S&P from stable to negative as the uncertainty over its ability to meet bailout conditions continued. In the US, unemployment figures continued to worsen and the Fed’s chief Bernanke was forced to address the unemployment problem at Jackson Hole. Overall data releases from China were weak with declining exports, industrial production and manufacturing figures. Earnings revisions for MSCI EM were revised downwards for 2012 and 2013. The salient moment for the fourth quarter was undoubtedly the re-election of President Obama and the last minute knife edge decision for the fiscal cliff. The re-election of President Obama helped to remove some of the policy uncertainty for the US. A strong rally in China in December allowed the Shanghai composite to erase some of its earlier losses of this year. Equity Fund Luxury & Tourism outperformed the broad market during the last year and had mostly positive performances throughout the year. The fund strongly outperformed the broad world market for the first three months of the year. All of the themes in the fund were in positive territory for the first quarter with consumer durables being the strongest. The top names during this period were Hugo Boss, Arctic Cat and Christian Dior. The standout name in terms of detractors to fund performance was the dual-listed Cruise company Carnival. The company hit the headlines in early January after the disaster that was the Costa Concordia which ran aground off the coast of Italy. The Costa Concordia which was carrying over 3,200 passengers ran aground and struck submerged rocks and resulted in the deaths of a small number of passengers. Marketing for the company was suspended in the wake of the accident. Whilst the share price dipped substantially in the immediate aftermath of the accident. These losses continued well into February and the stock only began its faint recovery in March. The following quarter marked a period of mixed returns and underperformance against the broad world market as the fund suffered losses in May and June. The most disappointing month in terms of performance was May with all sectors of the fund in negative territory. The recreation theme was the most successful in terms of performance during the second quarter with consumer durables reversing some of its gains and fairing the worst. In terms of recreation stocks, Walt Disney had a superior quarter after they announced strong second quarter earnings which beat analysts’ estimates. Revenue at their theme parks and consumer products rose sharply. Disney’s share price hit an all time high during the month of May and continued on its rally until early October. During May momentum appeared to decelerate, especially in the US luxury market. Whilst growth figures still appeared positive throughout leading US department stores, the figures are not ahead of expectations. There was also a noticeable slowdown in the robust Europe tourist traffic which had driven much of the sectors strong sales to date. Entering the third quarter the fund improved from its dismal performance from the previous quarter and witnessed a modest positive performance. However when compared to the broad world market the fund had underperformed. All themes within the fund were in positive territory aside from personal products. Volkswagen was the top name for the fund during the third quarter. They began the quarter on a high after they finally agreed after a ‘seven-year saga’ to buy the 50.1 percent stake in Porsche. The cash deal is based on an equity value of 3.88 billion euro and was seen as a considerable growth opportunity in the high margin premium autos sector. The combination of the two firms will strengthen the business both financially and strategically. The stock continued its ascent throughout the year and was an overall noteworthy stock in terms of performance for the fund this year. The final quarter of the year saw the fund regain its composure and make solid gains whilst also outperforming the broad world market. All themes of the fund contributed positively to the overall return. Consumer durables were once again the key theme leading the gains, followed closely by travel & accommodation. Danish jewelry maker Pandora was a strong performer this quarter and also throughout the second half of the year. After a disastrous cycle last year which saw shareholder value wiped out, Pandora finally saw a resurgence in its share price after they raised their outlook for full year gross margins. Q2 EBIT figures were above expectations and the autumn winter collections of their products were well received within stores.
2.1.8 FUTURE POLICY Looking forward, we believe that 2013 will be a year of sluggish and weak growth for the overall global economy. While global growth is expected to be positive it is not anticipated that it will be much more positive when compared to 2012. Developed markets are being highlighted as the point of weakness with only modest expansion expected. The ongoing fiscal crisis in the Eurozone is expected to continue its negative influence on global growth. Despite the European Central Bank’s efforts to control and address the crisis, Europe remains in an unstable condition. Economic releases for the Eurozone countries are not supportive with overall GDP figures expected to continue their decline in 2013. A second cause of concern is the fiscal restructuring as a result of the credit crisis that remains, almost 5 years on, for both the US and Eurozone. Household incomes and corporate and financial sector rebalancing is expected to continue hindering consumption growth in these regions. The fiscal austerity that is being forced upon consumers is making stable domestic growth for many countries virtually impossible. While a political crisis has been averted in the US after a last minute agreement regarding the fiscal cliff, this may only a short term solution in advance of the debt ceiling debate to follow in February. Inflation is expected to remain contained in developed markets this year allowing monetary policy to focus on growth. In the US, growth is predicted to improve in the second half of the year along with improvement in the housing market and unemployment figures. It would appear that growth in 2013 will emanate from the same source as 2012, with almost 90% of global GDP growth expected to originate from Emerging Markets. Growth is also expected to continue in China where considerable confidence remains, however it is not expected to surpass the growth of 2012. In relation to the BRIC countries, Brazil is expected to exhibit the most improved growth as its economy rebounds as a result of the monetary and fiscal policies introduced this year. The key macro issues facing Emerging Markets in 2013 are the EU sovereign debt crisis, US fiscal policy and Chinese growth. For 2013, in respect of the luxury sector it is expected that there will be further normalisation of demand patterns. While China remains the key area for growth, new frontiers such as the Middle East, Brazil and South-East Asia are being explored by key companies interested in expanding their reach. Companies will also be focusing on improving their distribution channels through greater retail penetration and improving their e-commerce presence. In the US, high-end luxury retail is holding up well and is expected to remain positive into 2013. While traffic into stores was relatively flat towards the end of 2012, a steady improvement is expected for the coming year. With only modest growth expected for the global economy this year, it is reasonable to expect that growth will also be relatively modest for the luxury sector. The strength however will remain in Emerging Markets which display the most encouraging growth figures. This divergence between the Developed markets and Emerging markets growth is positive for the sector. Rising disposable income within the middle class section of China is encouraging for companies and the continued increase in travelling consumers is also crucial.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 11.863.216,19 13.819.346,55
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 578.540,45 394.278,09 C. Shares and similar instruments a) Shares 11.867.065,41 13.797.511,82 Of which securities lent 534.543,99 521.230,45
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 7.835,55 2.386,26 b) Tax assets 676,31 386,46 B. Payables a) Accounts payable (-) -3.625,50 -7.045,09 d) Collateral (-) -578.540,45 -394.278,09
V. Deposits and cash at bank and in hand A. Demand balances at banks 32.616,00 42.474,71
VI. Accruals and deferrals A. Expense to be carried forward 538,11 B. Accrued income 10.069,46 17.861,43 C. Accrued expense (-) -51.421,04 -34.767,15
TOTAL SHAREHOLDERS' EQUITY 11.863.216,19 13.819.346,55
A. Capital 5.100.158,31 9.898.730,45
B. Income equalization 61.669,49 17.892,04
C. Profit(Loss) carried forward 3.920.616,10 5.980.741,20
D. Result for the period 2.780.772,29 -2.078.017,14
IX Financial instruments lent 534.543,99 521.230,45
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 3.663.644,72 -2.484.808,97 D. Other securities -502,32 2,33 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -843.682,06 472.758,76
II. Investment income and expenses A. Dividends 345.963,59 292.281,88 B. Interests a) Securities and money market instruments 19.050,45 23.509,41 b) Cash at bank and in hand and deposits 583,74 689,27 C. Interest on borrowings (-) -1.724,42 -725,78
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
184.978,78 1.172,43
B. Other 12.598,32
IV. Operating expenses A. Investment transaction and delivery costs (-) -207.236,73 -45.107,88 B. Financial expenses (-) -187,76 -2.304,42 C. Custodian's fee (-) -11.551,00 -13.781,90 D. Manager's fee (-) a) Financial management Classic Shares -95.045,45 -206.035,85 Institutional B Shares -212.921,41 -7.509,36 b) Administration and accounting management -22.275,92 -15.392,14 F. Formation and organisation expenses (-) -2.341,84 -82.740,68 G. Remuneration, social security charges and
pension -3,13
H. Services and sundry goods (-) -4.644,18 -4.736,91 J. Taxes Classic Shares -4.087,48 -11.265,13 Institutional B Shares -1.089,56 3.727,99 K. Other expenses (-) -26.158,86 -10.345,38
Income and expenditure for the period Subtotal II + III + IV -38.688,05 -65.969,26
V. Profit (loss) on ordinary activities before tax 2.780.772,29 -2.078.017,14
VII. Result for the period 2.780.772,29 -2.078.017,14
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 6.763.057,88 3.920.616,10 Profit (loss) brought forward from the previous
financial year 3.920.616,10 5.980.741,20
Profit for the period available for appropriation 2.780.772,29 -2.078.017,14 Income on the creation of shares (income on the
cancellation of shares) 61.669,49 17.892,04
II. (Appropriations to) Deductions from capital -6.759.850,57
III. Profit (loss) to be carried forward 3.920.616,10
IV. (Dividends to be paid out) -3.207,31
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND LUXURY & TOURISM
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND LUXURY & TOURISM
(IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 42.399.725,69 37.415.004,10 79.814.729,80 Sales 10.708.013,60 73.698.388,98 84.406.402,58 Total 1 53.107.739,29 111.113.393,09 164.221.132,38 Subscriptions 44.625.353,86 22.348.917,72 66.974.271,58 Redemptions 12.636.189,27 59.085.571,31 71.721.760,58 Total 2 57.261.543,13 81.434.489,03 138.696.032,16 Monthly average of total assets
14.527.449,17 31.050.203,05 22.788.826,11
Turnover rate -28,59 % 95,58 % 112,01 %
1st half of year 2nd half of year YearPurchases 42.399.725,69 37.415.004,10 79.814.729,80 Sales 10.708.013,60 73.698.388,98 84.406.402,58 Total 1 53.107.739,29 111.113.393,09 164.221.132,38 Subscriptions 44.625.353,86 22.348.917,72 66.974.271,58 Redemptions 12.636.189,27 59.085.571,31 71.721.760,58 Total 2 57.261.543,13 81.434.489,03 138.696.032,16 Monthly average of total assets
17.373.390,10 31.107.027,70 22.860.687,13
Corrected turnover rate -23,91 % 95,41 % 111,66 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 578.540,45 578.540,45 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 6.504.538,98 114.960,24
2012 - 12 63.783.067,34 66.140.774,41
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 6.564.259,12 96,38
2012 - 12 5.857.420,31 112,24
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0168205079 EUR 15.72% 12.80% 0.93% 0.0368 02/07/1998 0.25%
DIV BE0168207091 EUR 15.72% 12.78% 0.91% 0.0367 02/07/1998 0.24%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228550834 EUR 15.77% 25/11/2011 21.47%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 0.26 EUR net (0.34 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.715% Classic Shares Capitalization: 1.736% Institutional B Shares Capitalization: 1.67% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 11,476 6,802 59.27%
CSFBSAS 12,946 7,344 56.73%
DEUTSCHE 11,981 6,847 57.14%
EQ CSA MACQUARIE 324 202 62.50%
MERRILL 545 340 62.50%
MORGAN STANLEY 26,193 16,082 61.40%
NOMURA 21,109 11,966 56.69%
UBSWDR 39,638 24,774 62.50%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 19.975,21 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ALL NIPPON AIRWAYS CO LTD JPY 81.999 181,000 130.191,39
CHOW TAI FOOK JEWELLERY GROUP HKD 87.974 12,440 107.097,44
HERMES INTERNATIONAL SA EUR 77 226,300 17.425,10
PRADA SPA HKD 500 73,950 3.618,37
SHANGRI-LA ASIA HKD 45.251 15,440 68.372,24
SHARP CORP JPY 44.999 303,000 119.602,61
SONY JPY 10.500 958,000 88.236,84
Total 534.543,99
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
OAT FRANCE 2003 4 1/4% 25/04/19 EUR 141.000 EUR 172.274,36
OAT FRANCE 2003 4% 25/04/14 EUR 10.000 EUR 10.797,13
FRANCE 2004 1,60% 25/07/2015 EUR 127.000 EUR 163.195,25
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 174.000 EUR 191.830,13
FRANCE - 04/55 4.00 % 25/04 EUR 33.000 EUR 40.443,58
Total 578.540,45 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Trends
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND TRENDS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 30 April 1998 Initial subscription price: 5000 BEF Currency: EUR Institutional B Shares : Launch date: 25 November 2011 Initial subscription price: 77.97 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED The sub-fund invests primarily in shares of companies operating in areas which, according to the manager, fit with the theme 'challenges and opportunities that will apply during this and subsequent decades'. The manager focuses mainly on shares of emerging market companies, companies involved in urban development, those involved in prospecting and mining of natural resources and companies whose business focuses on long-term trends of demographics, globalisation, healthcare, technology and innovation.
RISK CONCENTRATION New economy shares.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Looking back over the past year, 2012 was equally as tumultuous as the previous year. In January equity markets moved considerably higher. The Fed’s announcement that rates will remain low until at least late 2014, record results from Apple and positive US GDP growth numbers were the key support factors for equity markets. Emerging equity markets led the pack early on. After a short pause in early February, equities climbed higher again in the second half of the month. Regionally, the euro area markets strongly outperformed. Positive macroeconomic developments, especially in the US, the successful Greek debt restructuring and the liquidity injection by central banks encouraged a modest increase in equity markets in March. Towards the end of the month investors’ optimism was tempered by worries over the risks for a hard landing in China and the rise in government bond yields throughout the world.
At the start of the second quarter macro data was not supportive for equity markets. The reporting season for the first quarter was a positive factor with some 75% of US companies (S&P 500) beating expectations. In Europe, there were less positive surprises and, disappointingly earnings were down year-on-year. Euro area equity markets strongly underperformed other regions once again, while Emerging market equities also continued to underperform their Developed Market counterparts. The downward trend on stock markets intensified in May. Uncertainty over Greece and Spain continued to weigh on investors' mood in June. The announcement of plans to enable the European Stability Mechanism to directly capitalise banks rather than direct funds through the sovereign led to sharp gains in the final trading days of the month. European stock markets benefited most from the late rally, strongly outperforming other regions. During July, economic data remained weak for most regions. At the start of July, the IMF reduced its outlook on US economic growth for 2012 and 2013 due to a slowdown in consumer spending and economic demand. Despite the weak economic releases during the month, the ECB stepped in at month end to awaken global markets. August marked a month of improvement in equities after reassurances from both the ECB and the Fed. Greece’s credit rating outlook was lowered further by S&P from stable to negative as the uncertainty over its ability to meet bailout conditions continued. In the US, unemployment figures continued to worsen and the Fed’s chief Bernanke was forced to address the unemployment problem at Jackson Hole. Overall data releases from China were weak with declining exports, industrial production and manufacturing figures. Earnings revisions for MSCI EM were revised downwards for 2012 and 2013. The salient moment for the fourth quarter was undoubtedly the re-election of President Obama and the last minute knife edge decision for the fiscal cliff. The re-election of President Obama helped to remove some of the policy uncertainty for the US. A strong rally in China in December allowed the Shanghai composite to erase some of its earlier losses of this year. With regards to the KBC Equity Fund Millennium, the fund has increased in value over 2012, slightly behind the broad market. The fund invests in shares whose investment trends include China & India, Climate Change, Urbanisation, Environmental pressures, Asian Infrastructure, Demographic transitions and long term growth. While all themes in the fund were in positive territory, the top performing theme was Emerging Markets followed by Demographic transitions. The top investments in the fund were in the New Asia and New Market themes. Gold and natural resources were the most disappointing themes ending the year in negative territory. In terms of sector performance, investments in Financials and Information Technology were the most impressive with Telecommunications and Materials lagging. The Millennium theme had a strong performance in the first half of the year, however the fund underperformed the broad market. Most sectors in the fund had positive results with the Technology and New Asia themes outperforming. Strong names came in the form of the Elster Group, Samsung Electronics and Pure Technologies. Stocks such as Turk Hava Yollari also led the gains. Turkish Hava Yollari otherwise known as Turkish Airlines ended the first half of the year with its share price on a ten month high. The airline is Europe’s fifth biggest and plans to purchase at least 15 jumbo airliners along with many other prospective acquisitions being considered. Semiconductors were another strong sector in the fund driven by the strong performance of Samsung Electronics. Samsung which is Asia’s largest consumer electronics maker posted first quarter profits that beat analysts’ estimates. Much of these gains are attributed to their successful manufacturing of smart phones. Operating profit rose to a quarterly record after they introduced their ‘Galaxy Note’ product which was seen as a direct competitor to Apple’s similar products. In terms of laggard performances within the fund, both the Energy and Materials sectors disappointed. With regards to the Energy sector, leading oil producers Gazprom and Petrobras were the most disappointing names for the fund. The global economic woes hurt demand for oil for the first six months. Europe continues to be Gazprom’s primary export market and the ongoing instability has heavily affected orders for crude oil. Fuel demand in Europe has reduced by 12 percent for the first quarter of 2012. In terms of the materials sector, Newcrest Mining was the worst performing name. The best performing sectors in the fund were Utilities, Banks, Food and Beverage and Healthcare. On a regional basis, all sectors of the fund were in positive territory over the first six months of the year. Emerging Markets which are a key focus for the fund, was the best performing region, followed closely by North America. Despite the ongoing fiscal worries within Europe, the regional picks performed well. Pacific whilst being in positive territory was the least impressive of the four regions.
The performance of KBC Equity Fund Millennium continued on its positive trend during the third quarter and outperformed the index over the period. All sectors of the fund found themselves in positive territory over the quarter. Performance of the Energy and Information Technology sectors improved the most for the fund with Telecommunication Services in relatively flat territory. Top stocks during the quarter came in the form of Devgen, Korea Gas Corporation and Newcrest Mining. The most laggard stock was the Brazilian iron ore producer Vale who posted their lowest quarterly profit in more than two years. Vale are hoping for a rebound in Chinese economic growth as they account for almost a third of Vale’s sales. The recovery in infrastructure investment and housing will increase the demand for metal and therefore drive sales for Vale. The stable results of the fund during June and August sustained the positive performance over the quarter. KBC Equity Fund Millennium returned a flat performance throughout the fourth quarter, with the fund slightly underperforming the index over the period. The fund started the fourth quarter in negative territory and underperformed the index during October, however the losses were reversed during November and December as the markets began to improve. In terms of positive names, the Financial sector was once again a top sector with Consumer Discretionary and Industrials following closely. The Emerging Markets theme was the only positive theme for the fund in the last quarter of the year, with investments in the Technology and Gold themes fairing the worst. On a similar trend to last year Samsung Electronics remained a noteworthy name for the fund. After a year of legal wrangling with their competitor Apple, Samsung scored a victory at year end as Apple agreed to relinquish on the latest infringement case. Profit for the smart phone manufacturer is expected to be higher than consensus expectations for the fourth quarter. Overall KBC Equity Fund Millennium witnessed a positive performance throughout the year stemming from impressive Emerging Markets performance, however the fund ended the year underperforming the index over the year 2012.
2.1.8 FUTURE POLICY Looking forward, we believe that 2013 will be a year of sluggish and weak growth for the overall global economy. While global growth is expected to be positive it is not anticipated that it will be much more positive when compared to 2012. Developed markets are being highlighted as the point of weakness with only modest expansion expected. The ongoing fiscal crisis in the Eurozone is expected to continue its negative influence on global growth. Despite the European Central Bank’s efforts to control and address the crisis, Europe remains in an unstable condition. Economic releases for the Eurozone countries are not supportive with overall GDP figures expected to continue their decline in 2013. A second cause of concern is the fiscal restructuring as a result of the credit crisis that remains, almost 5 years on, for both the US and Eurozone. Household incomes and corporate and financial sector rebalancing is expected to continue hindering consumption growth in these regions. The fiscal austerity that is being forced upon consumers is making stable domestic growth for many countries virtually impossible. While a political crisis has been averted in the US after a last minute agreement regarding the fiscal cliff, this may only a short term solution in advance of the debt ceiling debate to follow in February. Inflation is expected to remain contained in developed markets this year allowing monetary policy to focus on growth. In the US, growth is predicted to improve in the second half of the year along with improvement in the housing market and unemployment figures. It would appear that growth in 2013 will emanate from the same source as 2012, with almost 90% of global GDP growth expected to originate from Emerging Markets. Growth is also expected to continue in China where considerable confidence remains, however it is not expected to surpass the growth of 2012. In relation to the BRIC countries, Brazil is expected to exhibit the most improved growth as its economy rebounds as a result of the monetary and fiscal policies introduced this year. The key macro issues facing Emerging Markets in 2013 are the EU sovereign debt crisis, US fiscal policy and Chinese growth.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 102.054.245,65 27.266.129,89
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 291.835,20 163.908,00 a} Collateral received in the form of bonds 2.366.187,50 184.498,95 C. Shares and similar instruments a) Shares 95.520.357,83 25.223.594,60 Of which securities lent 1.944.152,77 382.634,99 b) Closed-end undertakings for collective
investment 349.843,20
D. Other securities 543,66 E. Open-end undertakings for collective investment 5.977.296,88 1.498.504,85 F. Derivative financial instruments j) Foreign exchange Futures and forward contracts (+/-) -3.064,83 622,06 m) Financial indices Futures and forward contracts (+/-) -4.029,50 317,75
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 822.446,53 1.214,87 b) Tax assets 823,65 c) Collateral 13.273,67 9.243,57 B. Payables a) Accounts payable (-) -801.672,27 -53.677,35 c) Borrowings (-) -165.566,25 -39.472,87 d) Collateral (-) -2.366.187,50 -184.498,95
V. Deposits and cash at bank and in hand A. Demand balances at banks 462.108,88 135.650,43
VI. Accruals and deferrals A. Expense to be carried forward 1.319,40 B. Accrued income 86.726,97 32.245,09 C. Accrued expense (-) -146.291,11 -57.727,37
TOTAL SHAREHOLDERS' EQUITY 102.054.245,65 27.266.129,89
A. Capital 93.171.726,53 23.330.392,21
B. Income equalization 133.222,00 19.765,05
C. Profit(Loss) carried forward 3.935.737,68 8.148.656,57
D. Result for the period 4.813.559,44 -4.232.683,94
I.A.B Cash at bank and in hand/deposits 13.273,67 9.243,57
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 542.324,03 287.994,91
IX Financial instruments lent 1.944.152,77 382.634,99
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -42.653,40 185,60 C. Shares and similar instruments a) Shares 5.977.241,47 -3.024.843,30 b) Closed-end undertakings for collective
investment 7.496,64 13.327,36
D. Other securities -6.340,75 -76.994,84 E. Open-end undertakings for collective investment 338.304,76 -833.842,15 F. Derivative financial instruments l) Financial indices Futures and forward contracts 36.173,13 317,75 G. Receivables, deposits, cash at bank and in hand
and payables 0,10
H. Foreign exchange positions and transactions a) Derivative financial instruments Futures and forward contracts -3.686,89 622,06 b) Other foreign exchange positions and
transactions -2.050.693,22 -75.485,04
II. Investment income and expenses A. Dividends 1.846.577,09 439.454,87 B. Interests a) Securities and money market instruments 84.769,00 14.429,84 b) Cash at bank and in hand and deposits 4.301,91 2.075,59 c) Collateral (+/-) 10,49 C. Interest on borrowings (-) -4.668,56 -5.930,31
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
297.327,74
B. Other 699,91
IV. Operating expenses A. Investment transaction and delivery costs (-) -386.612,37 -129.582,33 B. Financial expenses (-) -1.134,18 -3.728,54 C. Custodian's fee (-) -21.532,11 -17.656,23 D. Manager's fee (-) a) Financial management Classic Shares -370.535,27 -296.644,55 Institutional B Shares -711.584,40 b) Administration and accounting management -82.337,77 -30.529,60 E. Administrative expenses (-) 0,01 F. Formation and organisation expenses (-) -7.991,51 -183.269,86 G. Remuneration, social security charges and
pension -6,16 -6,33
H. Services and sundry goods (-) -12.340,92 923,64 J. Taxes Classic Shares -17.540,51 -18.702,55 Institutional B Shares -8.577,33 K. Other expenses (-) -50.397,05 -7.515,43
Income and expenditure for the period Subtotal II + III + IV 557.717,60 -235.971,38
V. Profit (loss) on ordinary activities before tax 4.813.559,44 -4.232.683,94
VII. Result for the period 4.813.559,44 -4.232.683,94
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 8.882.519,12 3.935.737,68 Profit (loss) brought forward from the previous
financial year 3.935.737,68 8.148.656,57
Profit for the period available for appropriation 4.813.559,44 -4.232.683,94 Income on the creation of shares (income on the
cancellation of shares) 133.222,00 19.765,05
II. (Appropriations to) Deductions from capital -8.865.458,46
III. Profit (loss) to be carried forward 3.935.737,68
IV. (Dividends to be paid out) -17.060,66
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND TRENDS
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Open-end funds
UCITS registered with the FSMA
Belgium
HORIZON ACCESS FD CHINA KAP 4.020,03 USD 653,000 1.991.110,13 4,58 1,96 1,95
HORIZON ACCESS INDIA FD KAP 4.982,45 USD 1.054,780 3.986.186,75 3,42 3,93 3,92
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND TRENDS (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 86.132.103,87 66.344.348,07 152.476.451,94 Sales 39.311.727,37 42.973.133,44 82.284.860,81 Total 1 125.443.831,24 109.317.481,51 234.761.312,75 Subscriptions 65.251.301,11 47.515.442,44 112.766.743,55 Redemptions 18.370.406,40 24.494.439,55 42.864.845,95 Total 2 83.621.707,51 72.009.881,99 155.631.589,50 Monthly average of total assets
71.139.274,32 94.725.653,37 83.080.495,51
Turnover rate 58,79 % 39,38 % 95,24 %
1st half of year 2nd half of year YearPurchases 86.132.103,87 66.344.348,07 152.476.451,94 Sales 39.311.727,37 42.973.133,44 82.284.860,81 Total 1 125.443.831,24 109.317.481,51 234.761.312,75 Subscriptions 65.251.301,11 47.515.442,44 112.766.743,55 Redemptions 18.370.406,40 24.494.439,55 42.864.845,95 Total 2 83.621.707,51 72.009.881,99 155.631.589,50 Monthly average of total assets
70.079.633,58 93.999.847,61 82.434.523,29
Corrected turnover rate 59,68 % 39,69 % 95,99 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
Capitalization Distribution Capitalization Distribution
2012 - 12 108.024.276,08 34.627.262,50
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2012 - 12 74.988.548,40 94,02
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0167243154 EUR 11.61% 4.62% -2.35% 0.0193 30/04/1998 -3.77%
DIV BE0167244160 EUR 11.60% 4.62% -2.35% 0.0193 30/04/1998 -3.78%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
The cumulative returns are shown where they relate to a period of at least one year.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR (ex BEF). The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Dividend on ex-dividend date 28/03/2013: 0.49 EUR net (0.66 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.545% Classic Shares Capitalization: 1.563% Institutional B Shares Capitalization: 1.56% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 36,784 22,640 61.55%
CSFBSAS 17,943 10,865 60.56%
DEUTSCHE 9,895 5,437 54.95%
EQ CSA MACQUARIE 5,842 3,651 62.50%
HSBC 1,851 404 21.81%
MERRILL 5,721 3,427 59.90%
MORGAN STANLEY 16,670 9,900 59.39%
NOMURA 39,325 22,927 58.30%
UBSWDR 9,538 5,910 61.97%
WOOD 231 58 25.00%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The S&P 500 is an equity index computed by Standard & Poor’s that is made up of 500 shares. The dividend is not reinvested. The S&P 500 serves primarily as a continuous indicator of market trends on the US stock markets. The value of the S&P 500 index is calculated on the basis of the market value of the shares of 500 companies at a given point in time, compared to the market value of the shares of 500 similar companies during the reference period from 1941 to 1943. The index is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Standard & Poor’s has all proprietary rights with repect to the index. In no way Standard & Poor’s endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Standard & Poor’s disclaims any liability for the issue and offering of the shares of this undertaking for collective investment The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service.
Name Maximum management feeHorizon-Access Fund China-Classic Shares 1,60 Horizon-Access India Fund-Classic Shares 1,60 KBC Equity Fund-Millennium-Institutional B Shares 1,50 KBC Equity Fund-Millennium-Classic Shares 1,50
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 21.211,49 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
ALL NIPPON AIRWAYS CO LTD JPY 82.999 181,000 131.779,11
BANK PEKAO SA PLN 3.756 167,500 154.187,19
CHINA NATL. BUILDING MATERIAL -H- HKD 139.999 11,340 155.361,12
CHINA OVERS LAND INV HKD 83.999 23,100 189.884,91
CHINA RAILWAY CONSTRUCTIO-H- HKD 198.499 8,810 171.134,90
CLP HOLDINGS HKD 54.499 64,850 345.862,01
KGHM POLSKA MIEDZ SA PLN 3.135 190,000 145.981,91
MAGYAR OLAJ-ES (BUD) HUF 2.224 17755,000 135.592,06
POLSKI KONCERN NAFTO PLN 12.293 49,500 149.132,05
POWSZECHNY ZAKLAD UBEZPIECZEN SA PLN 1.466 437,000 157.008,55
SHANGRI-LA ASIA HKD 54.387 15,440 82.176,33
SONY JPY 15.000 958,000 126.052,63
Total 1.944.152,77
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FLEMISH COMMUNITY - 09/14 3.75% 31/03 EUR 1.000.000 EUR 1.070.011,00
OAT FRANCE 2003 4% 25/04/14 EUR 75.000 EUR 80.978,47
FRANCE 2004 1,60% 25/07/2015 EUR 291.000 EUR 373.935,58
OAT FRANCE 2005 3 1/2% 25/04/15 EUR 227.000 EUR 250.261,14
FRANCE - 04/55 4.00 % 25/04 EUR 378.000 EUR 463.262,81
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 114.000 EUR 127.738,48
Total 2.366.187,48 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Euro Cyclicals
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND EURO CYCLICALS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 30 December 1999 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 516.88 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of European companies in cyclical sectors.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. In Europe the debt crisis continued to rage unabated. Five euro countries needed a bail-out from the European emergency funds. Greece twice reached an agreement during the year with its private sector creditors concerning a rescheduling of its bond debts. Spain came into the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. In the EMU real GDP shrank by 0.3% y-o-y. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany fulfilled its traditional role as locomotive of the European economy to a lesser extent than in the recent past. Greater divergence within Europe resulted in a further decline in unemployment in Germany and an alarmingly rapid rise in unemployment in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery. Market performance was consequently dictated in 2012 by volatile sentiment. During the first three months the markets were buoyed by relative economic optimism. After the gains slackened in April and May, a fine rally occurred from early June onwards, thereby negating the gloomier economic signals. On 31 December the MSCI All Countries (the broadest world index) in euros was 14.5% higher than at the end of 2011.
Of the traditional markets, Western Europe (MSCI Europe index return index up 18.4% over this period) managed to claw back some of the underperformance built up since the start of the euro crisis in autumn 2009, despite the continuing influence of certain problem files. Evidently the underperformance of European shares had seen such a valuation gap open up against US shares that new episodes in the euro crisis lacked the same impact on the trading floor. Wall Street closed the year up substantially higher on balance (S&P500: +13.4%, Dow Jones: +7.3%), while European investors also benefited from the small increase in the value of the dollar (MSCI USA return in euros: +13,9%). The BEL 20 rose by 18.8%, more or less in line with the performance of other European stock markets. The Belgian banking stocks KBC and Ageas recorded the best performance, while Solvay and AB InBev, which has taken over the Mexican market leader Modelo, were once again star performers. D’Ieteren, Mobistar and especially Delhaize, which is grappling with structural problems in its two main markets, were the two main disappointments during the period under review.
2.1.8 FUTURE POLICY In Europe the budgetary plans, the banks' tighter lending policy and the high level of uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could therefore see a further contraction in European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified. The crisis has also brought the realisation that economic governance, as it is now called in Eurospeak, needs to be tackled as a matter of urgency. In concrete terms, this involves measures such as supranational supervision of banks, strict monitoring and sanctioning of budgetary policy, monitoring of pay policy and harmonising European taxation. In the coming months the organisation of the ESM (European Stability Mechanism, which came into operation from 1 October 2012) the installation of the pan-European banking supervision within the ECB (to be in place by 1 March 2014) and the implementation of the Fiscal Stability Treaty (in force since 1 January 2013) will continue to demand considerable energy and diplomatic dexterity. No delays can be permitted in this work to set up a new architecture for the EMU. Since it may be argued that money market rates will not increase rapidly and that bond rates are at an historical low, everything would appear to point to shares as the best investment option in the months ahead. The lack of alternatives is not, of course, sufficient reason to increase the market valuation. For that to happen, investors will need to be more predisposed to taking risk. The present valuation prices in very gloomy scenarios. Based on forecast earnings for 2013, the price-earnings ratio (PE) is 13.5 for the US S&P 500 index and 11.4 for the MSCI Europe. That is 25% and 30% respectively lower than the historical average. Equities are certainly dirt-cheap compared with bonds. The earnings yield – the inverse of the price/earnings ratio – is currently 8.7% for the MSCI Europe, an unprecedented premium of some 740 basis points above German bond yields.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 7.555.205,52 8.484.367,95
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 84.740,19 C. Shares and similar instruments a) Shares 7.592.349,77 8.402.703,13 Of which securities lent 91.222,56 D. Other securities 1.403,89 F. Derivative financial instruments m) Financial indices Futures and forward contracts (+/-) 2.798,09
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 29.972,48 72,84 b) Tax assets 2.273,16 2.328,76 c) Collateral 8.729,57 B. Payables a) Accounts payable (-) -26.984,59 -16.505,22 c) Borrowings (-) -82.766,67 -55.302,30 d) Collateral (-) -84.740,19
V. Deposits and cash at bank and in hand A. Demand balances at banks 40.333,53 143.767,06
VI. Accruals and deferrals A. Expense to be carried forward 1.941,27 B. Accrued income 3.878,13 9.029,98 C. Accrued expense (-) -5.254,18 -15.195,23
TOTAL SHAREHOLDERS' EQUITY 7.555.205,52 8.484.367,95
A. Capital 6.483.123,61 -643.952,87
B. Income equalization -19.208,04 -227.551,13
C. Profit(Loss) carried forward 15.532.989,64
D. Result for the period 1.091.289,95 -6.177.117,69
Off-balance-sheet headings
I Collateral (+/-)
I.A Collateral (+/-)
I.A.A Securities/market instruments 84.740,19
I.A.B Cash at bank and in hand/deposits 8.729,57
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 112.435,59
IX Financial instruments lent 91.222,56
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 840.236,81 -6.766.383,72 D. Other securities -1.300,55 1.602,92 F. Derivative financial instruments l) Financial indices Futures and forward contracts -4.018,41 20.318,27 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 156.643,80 362.177,38
II. Investment income and expenses A. Dividends 241.001,37 755.073,84 B. Interests a) Securities and money market instruments -1.191,30 62.143,06 b) Cash at bank and in hand and deposits 97,68 1.847,63 c) Collateral (+/-) 5,48 C. Interest on borrowings (-) -467,42 -2.534,45
III. Other income B. Other 797,80
IV. Operating expenses A. Investment transaction and delivery costs (-) -9.404,38 -125.315,37 B. Financial expenses (-) -127,88 -2.195,31 C. Custodian's fee (-) -8.647,87 -38.213,45 D. Manager's fee (-) a) Financial management Classic Shares -112.464,07 -387.082,38 b) Administration and accounting management -8.976,23 -24.167,12 E. Administrative expenses (-) -72,49 -68,66 F. Formation and organisation expenses (-) -817,16 -3.319,35 G. Remuneration, social security charges and
pension -7,33
H. Services and sundry goods (-) -2.378,10 -8.095,72 J. Taxes Classic Shares 4.076,37 -4.791,12 K. Other expenses (-) -900,22 -18.910,09
Income and expenditure for the period Subtotal II + III + IV 99.728,30 205.167,46
V. Profit (loss) on ordinary activities before tax 1.091.289,95 -6.177.117,69
VII. Result for the period 1.091.289,95 -6.177.117,69
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 1.072.081,91 9.128.320,82 Profit (loss) brought forward from the previous
financial year 15.532.989,64
Profit for the period available for appropriation 1.091.289,95 -6.177.117,69 Income on the creation of shares (income on the
cancellation of shares) -19.208,04 -227.551,13
II. (Appropriations to) Deductions from capital -1.055.640,97
III. Profit (loss) to be carried forward 9.109.389,20
IV. (Dividends to be paid out) -16.440,94 -18.931,62
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND EURO CYCLICALS
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Austria
OMV AG (WIEN) 475,00 EUR 27,355 12.993,63 0,17 0,17
VOESTALPINE AG - 626,00 EUR 27,660 17.315,16 0,23 0,23
Belgium
NYRSTAR STRIP VVPR 9.590,00 EUR 0,001 9,59
SOLVAY - 190,00 EUR 109,350 20.776,50 0,27 0,28
UMICORE - 438,00 EUR 41,690 18.260,22 0,24 0,24
UMICORE STRIP VVPR 240,00 EUR 0,001 0,24
Bermuda
SEADRILL LTD - 1.038,00 NOK 203,300 28.761,03 0,38 0,38
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND EURO CYCLICALS
(IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 1.246.790,30 19.101,66 1.265.891,96 Sales 2.323.301,04 762.585,30 3.085.886,34 Total 1 3.570.091,34 781.686,96 4.351.778,30 Subscriptions 779.030,97 49.360,98 828.391,95 Redemptions 2.042.262,37 769.635,91 2.811.898,28 Total 2 2.821.293,34 818.996,89 3.640.290,23 Monthly average of total assets
8.703.664,73 7.604.786,77 8.143.012,71
Turnover rate 8,60 % -0,49 % 8,74 %
1st half of year 2nd half of year YearPurchases 1.246.790,30 19.101,66 1.265.891,96 Sales 2.323.301,04 762.585,30 3.085.886,34 Total 1 3.570.091,34 781.686,96 4.351.778,30 Subscriptions 779.030,97 49.360,98 828.391,95 Redemptions 2.042.262,37 769.635,91 2.811.898,28 Total 2 2.821.293,34 818.996,89 3.640.290,23 Monthly average of total assets
8.904.721,16 6.845.858,90 8.415.993,27
Corrected turnover rate 8,41 % -0,55 % 8,45 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS Nil
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Institutional B Shares Change in number of shares in circulation: Nil Amounts received and paid by the UCI: Nil Net asset value: Nil
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0172711518 EUR 14.74% 6.98% -1.05% 0.0808 30/12/1999 2.22%
DIV BE0172710502 EUR 14.71% 6.96% -1.06% 0.0806 30/12/1999 2.20%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
The cumulative returns are shown where they relate to a period of at least one year.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Dividend on ex-dividend date 28/03/2013: 4.69 EUR net (6.25 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.694% Classic Shares Capitalization: 1.698% Institutional B Shares Capitalization: Not applicable * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CSFBSAS 11 5 44.44%
DEUTSCHE 300 188 62.50%
EQ CSA MACQUARIE 494 309 62.50%
MORGAN STANLEY 1,325 791 59.67%
NOMURA 155 97 62.50%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to -3.179,74 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Turkey
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND TURKEY
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 28 April 2006 Initial subscription price: 1000 TRY Currency: TRY Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 835.55 TRY Currency: TRY
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions.
STRATEGY SELECTED At least 75% of the assets are invested in shares of Turkish companies.
RISK CONCENTRATIN Turkish shares.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to CSOB Asset Management a.s., Radlicka 333/150 , 150 57 Praha 5, CZECH REPUBLIC..
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Equities globally had a strong start at the beginning of the year. ECB introduced second round of long term refinancing operations (LTRO), Greece received new aid package and European stability mechanism fund (ESM) increased its capacity. Two rounds of LTROs reached altogether stunning 1 trillion EUR of liquidity provided by ECB. In the second quarter, worse macro data in Europe, China and US showed global slow-down may be sharper than previously expected. During summer, markets were expecting ECB to come up with some decisive action. In September, ECB governor Mario Draghi announced direct purchase program of government bonds on secondary markets. Credit risk premium on troubled countries began falling bringing relief to equity markets as well. Situation in US has been overall improving during the year despite some short term swings. Potential problems were smoothed out by FED. FED expressed its will to keep record low rates until 2015 and has launched a new round of quantitative easing (3rd one already). FED expects to hold very loose monetary policy as long as unemployment remains above 6.5 % or until inflation picks up above 2.5 %. It was welcomed by investors.
From domestic events, Turkish GDP grew healthy in the range of 3 - 4 % dispelling worries over hard landing. Current account deficit, long term concern, was steadily easing from previous year highs. On top of that, Fitch upgraded Turkish credit rating to investment grade in November bringing fresh capital into the market as a consequence. Therefore, Turkey managed to decouple from the overall risk-off/on changes in global sentiment. The Turkish market (local index ISE 100) increased by 52.6 % in 2012 and became the second most growing market in the world for the year. We started the year with cautious approach towards Turkish assets given the risk of abrupt capital outflows in the case of deteriorating situation in Europe. Therefore, we were underweight in banking stocks and were overweight in some of the defensive sectors at the start of the year. However, lower commodity prices and surprisingly (for us) successful monetary policy made us to change our view towards Turkey in the second quarter. Our confidence regarding Turkish economy and market has increased with bigger focus on cyclical and financial companies. Easing interest rates were favourable for banking stocks, real estate funds as well as broader industry. Despite more pro-cyclical view, we were underweight in sector of materials due to weak Chinese data and overcapacity in Europe. Other underweight sectors were Telecommunication and Consumer Staples. The KBC Equity Fund Turkey increased by 59.35 % in 2012 beating its benchmark by 4.5 % mainly thanks to stock picking in financial, industrial and consumer discretionary sector. Underweight materials and Telecommunication sectors also paid off.
2.1.8 FUTURE POLICY Globally, necessary structural changes have not been made in Euro zone and we think debt concerns may hang over the markets again during this year. However, we expect loose monetary conditions in major economies to prevail, which should be favourable for global equities and emerging markets specifically. Situation in US is slowly improving and we think it will keep so. Political talks about debt stock level and its limitation may cause some short term concerns, but politicians don’t have much to choose from. Spending cuts and higher taxes will be, most likely, put off to better times. In Asia, China seems to succeed in supporting its economy and to get back on soft landing track. In Turkey, we expect to see a pick-up in domestic demand and hence GDP growth. There is also a broad market expectation of a second rating upgrade into investment grade from Moody´s or/and S&P. That would make Turkey eligible also for investors with conservative risk approach. Risks are represented by global and local ones. Among global risks we count mainly worsening situation in Euro zone, political disputes over debt situation in US and sharp slow-down in China. All these factors may lead to either slump in Turkish exports or tighter credit conditions, which may hurt Turkey via financing of its Current Account deficit. Locally, Turkish investment may be hit by regional conflicts in the Middle East.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 26.837.024,51 23.605.428,88
II. Securities, money market instruments, UCIs and derivatives
C. Shares and similar instruments a) Shares 26.773.107,50 23.555.950,00
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 12.989,76 1.444,99 B. Payables a) Accounts payable (-) -4.282,73 c) Borrowings (-) -31.960,12 -33.953,62
V. Deposits and cash at bank and in hand A. Demand balances at banks 126.551,56 107.124,68
VI. Accruals and deferrals A. Expense to be carried forward 930,56 B. Accrued income 4.063,28 C. Accrued expense (-) -39.381,46 -30.131,01
TOTAL SHAREHOLDERS' EQUITY 26.837.024,51 23.605.428,88
A. Capital 13.773.304,45 1.433.125,26
B. Income equalization -97.285,46 51.141,15
C. Profit(Loss) carried forward 28.551.875,33
D. Result for the period 13.161.005,52 -6.430.712,86
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 13.102.989,82 -6.441.471,05 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 1.744,56 10.012,67
II. Investment income and expenses A. Dividends 689.333,33 561.848,54 B. Interests a) Securities and money market instruments -4.157,94 8.622,97 b) Cash at bank and in hand and deposits 5.923,41 8.783,37 C. Interest on borrowings (-) -759,79 -491,17
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
26.872,75
B. Other 5.120,76
IV. Operating expenses A. Investment transaction and delivery costs (-) -128.071,79 -106.527,32 B. Financial expenses (-) -371,46 -2.649,55 C. Custodian's fee (-) -19.168,39 -20.933,35 D. Manager's fee (-) a) Financial management Classic Shares -384.016,90 -384.723,70 Institutional B Shares -61.187,88 -2.138,20 b) Administration and accounting management -28.830,13 -25.515,24 E. Administrative expenses (-) -312,28 -22,49 F. Formation and organisation expenses (-) -2.525,50 -3.050,59 H. Services and sundry goods (-) -6.794,99 -4.980,80 J. Taxes Classic Shares -17.480,92 -21.178,74 Institutional B Shares -496,98 817,97 K. Other expenses (-) -11.683,40 -12.236,94
Income and expenditure for the period Subtotal II + III + IV 56.271,14 745,52
V. Profit (loss) on ordinary activities before tax 13.161.005,52 -6.430.712,86
VII. Result for the period 13.161.005,52 -6.430.712,86
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 13.063.720,06 22.172.303,62 Profit (loss) brought forward from the previous
financial year 28.551.875,33
Profit for the period available for appropriation 13.161.005,52 -6.430.712,86 Income on the creation of shares (income on the
cancellation of shares) -97.285,46 51.141,15
II. (Appropriations to) Deductions from capital -13.063.720,06
III. Profit (loss) to be carried forward 22.097.108,97
IV. (Dividends to be paid out) -75.194,65
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND TURKEY
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Austria
DO & CO AG - 4.500,00 TRY 79,750 358.875,00 1,34 1,34
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND TURKEY (IN THE
CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 9.417.108,71 14.938.438,08 24.355.546,78 Sales 6.983.711,78 27.257.668,24 34.241.380,02 Total 1 16.400.820,49 42.196.106,32 58.596.926,80 Subscriptions 8.371.091,48 16.473.497,67 24.844.589,15 Redemptions 6.181.845,50 28.400.546,54 34.582.392,04 Total 2 14.552.936,98 44.874.044,21 59.426.981,19 Monthly average of total assets
29.237.201,49 29.062.896,40 29.150.763,31
Turnover rate 6,32 % -9,21 % -2,85 %
1st half of year 2nd half of year YearPurchases 9.417.108,71 14.938.438,08 24.355.546,78 Sales 6.983.711,78 27.257.668,24 34.241.380,02 Total 1 16.400.820,49 42.196.106,32 58.596.926,80 Subscriptions 8.371.091,48 16.473.497,67 24.844.589,15 Redemptions 6.181.845,50 28.400.546,54 34.582.392,04 Total 2 14.552.936,98 44.874.044,21 59.426.981,19 Monthly average of total assets
28.464.009,64 30.201.171,69 35.067.781,50
Corrected turnover rate 6,49 % -8,87 % -2,37 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS Nil
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 1.357.768,75 0,00
2012 - 12 11.770.869,31 10.769.667,17
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 1.401.872,89 862,69
2012 - 12 4.015.764,87 1.371,50
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0946058170 EUR 65.62% 11.95% -3.15% 28/04/2006 -0.79%
CAP BE0946058170 TRY 58.95% 15.36% 3.18% 28/04/2006 4.87%
DIV BE0946057164 EUR 65.96% 11.91% -3.18% 28/04/2006 -0.81%
DIV BE0946057164 TRY 59.28% 15.32% 3.16% 28/04/2006 4.85%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228909543 EUR 65.65% 24/11/2011 65.25%
CAP BE6228909543 TRY 58.98% 24/11/2011 56.62%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in TRY and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in TRY and in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 2.609% Classic Shares Capitalization: 1.614% Institutional B Shares Capitalization: 1.882% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 129 32 25.00%
HSBC 7,537 1,758 23.32%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.6% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. CSOB Asset Management a.s. receives a fee from the management company of max. 1.6% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to –94,66 TRY. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund High Dividend Eurozone
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND HIGH DIVIDEND EUROZONE
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 27 July 2007 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 266.02 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions. To the extent that derivatives are used, it concerns liquid and readily negotiable instruments. They do not, therefore, affect the liquidity risk. To the extent that derivatives are used, they are used to carry out the investment policy and within the limits of the investment strategy. They do not affect the market, performance and concentration risks or the risks associated with external factors or any kind.
Strategy selected This fund invests at least 75% of its assets in euro-area shares with a high dividend yield.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND.. KBC Fund Management Limited has delegated the intellectual management, to Kleinwort Benson Investors Dublin Ltd, Joshua Dawson House Dawson Street , Dublin 2, IRELAND.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Introduction: The KBC Equity Fund High Dividend Eurozone Fund invests primarily in shares that achieve a higher-than-average dividend yield within their industry. Dividend yield is not only an important valuation criterion for shares; it also provides a basic return. The fund avoids classic style exposure through industry group neutrality. Focussing on the High Dividend theme, we aim to achieve a neutral industry group allocation. This means that we look for shares with higher-than-average dividend yields in every sector. Consequently, there are also shares in the portfolio that appear at first sight to have a low dividend yield. Summary of Performance: The two main performance drivers for this fund are the high dividend theme and then stock-picking after that. Theme: The theme of high dividends has had a very weak 2012, particularly during Quarters 1, 3 & 4. The theme was more positive during quarter 2 but this did little to negate the impact of the other quarters. During Q1 2012 it was one of the worst performing styles in all regions. High dividend stocks suffered badly for the 3 months as the best performers in 2011 were out of favour at the start of the year. The reasons behind the poor performance of the theme were twofold. Generally, when markets are trending upwards like we witnessed in Q1 and growth styles begin to outperform, high dividend, defensive strategies struggle to rise in tandem. There is also a matter of possible over-valuation. Due to the strong performance of defensive industries in 2011, we witnessed a declining preference for these types of assets in Q1. Q2 2012 saw a complete reversal of the theme performance witnessed in Q1 of this year. Q2 saw much more nervous markets with muted returns mainly caused by political and economic risks associated with Greece, France and Spain. This type of environment is suitable for the theme of high dividends as investors look for defensive plays and the safety of income. The best performing industry groups during the quarter were telecoms, real estate, pharmaceuticals and food, beverage & tobacco – all of which are traditional high dividend industries. Quarter 3 was a very mixed period for high dividend stocks. Easing monetary policy globally and expectations for further actions from policy makers in Europe supported equities during late July but was most evident during the early stages of August. Among the best performing industries during this period were Telecoms, Financials and Pharmaceuticals, all defensive high dividend payers. The remainder of the quarter brought a complete reversal of what we witnessed in the first 6 weeks of the quarter. Investors became less defensive with a preference for high volatility, low return on equity and low forecast DY, these being some of the best performing styles over the quarter. In this type of environment, high DY will struggle. Quarter 4 was a continuation of the underperformance seen in high dividend stocks as Eurozone markets rallied strongly. A positive note to mention would be that our regional industry group neutral approach to constructing the theme will have helped enormously during the year. More traditional high dividend approaches would have been heavily overweight Utilities, Telecoms, Energy and Pharmaceuticals – these being those industries punished most during the year. For example our version of high dividend out-performed the MSCI EMU High Yield Index by just over 1,200 basis points during the year.
Stock-picking: There are a number of elements to our stock picking. Firstly our aim is to avoid deep value stocks that can be common in high dividend strategies. We want to avoid stocks where the DY looks attractive but it’s due to a severe drop in price. Overall this was a strong contributor to performance. Secondly and one of the most integral parts of our process is to focus on sustainability of dividends. Our focus is to buy quality names with strong balance sheets and an ability to sustain and potentially grow that dividend. This again added solid value as massive uncertainty across the globe made investors focus on more reliable, low volatility stock names with high sustainable dividends. Finally the third part of our stock picking process is the use of quantitative scores when optimising the portfolio. Overall quants performed well in 2012. Quantitative methods work best when volatility declines and clear trends are visible. While there were periods of short sharp changes in style and investor behaviour in certain months, quants were able to gain traction and add value over the period.
2.1.8 FUTURE POLICY In the high dividend portfolios at stock selection level, we will continue to emphasise companies with strong fundamentals, i.e. balance sheet, cash flow and management. Investing in companies with higher than average and growing dividends was a winning strategy for the past 24 months and this is expected to continue into 2013. We obviously continue to focus on the high dividend theme and avoid classic style exposure by aiming at Regional and industry group neutrality. We look for shares with higher-than-average dividend yields compared to their true peers. We believe sustainable high dividend payers will perform better over the long term.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 7 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 49.102.772,42 17.899.211,22
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 911.791,45 376.089,82 C. Shares and similar instruments a) Shares 48.850.210,20 17.770.183,55 Of which securities lent 844.566,75 400.604,98 D. Other securities 25.525,04 4.764,60 F. Derivative financial instruments m) Financial indices Futures and forward contracts (+/-) 19.640,01
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 15.646,83 36.723,14 b) Tax assets 66.120,03 56.244,28 c) Collateral 263.112,00 B. Payables a) Accounts payable (-) -8.139,36 -31.285,98 c) Borrowings (-) -0,06 d) Collateral (-) -911.791,45 -376.089,82
V. Deposits and cash at bank and in hand A. Demand balances at banks 206.521,00 -213.492,45
VI. Accruals and deferrals A. Expense to be carried forward 1.924,62 B. Accrued income 13.065,48 30.051,53 C. Accrued expense (-) -66.176,74 -38.654,08
TOTAL SHAREHOLDERS' EQUITY 49.102.772,42 17.899.211,22
A. Capital 43.870.556,23 22.788.186,61
B. Income equalization 151.058,74 -920.376,66
C. Profit(Loss) carried forward 3.467.103,76
D. Result for the period 5.081.157,45 -7.435.702,49
I.A.B Cash at bank and in hand/deposits 263.112,00
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 5.110.450,00
IX Financial instruments lent 844.566,75 400.604,98
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 3.971.475,47 -8.441.498,71 D. Other securities -12.361,29 -18.314,51 F. Derivative financial instruments l) Financial indices Futures and forward contracts 171.487,49 19.640,01 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -27,87 12,58
II. Investment income and expenses A. Dividends 1.572.818,40 1.664.707,19 B. Interests a) Securities and money market instruments 37.604,74 117.848,29 b) Cash at bank and in hand and deposits 7.261,08 1.843,53 C. Interest on borrowings (-) -375,73 -760,63
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
115.084,10 4.179,97
B. Other 4.040,97
IV. Operating expenses A. Investment transaction and delivery costs (-) -138.608,45 -140.621,19 B. Financial expenses (-) -476,79 -1.785,64 C. Custodian's fee (-) -16.122,89 -38.505,97 D. Manager's fee (-) a) Financial management Classic Shares -140.123,39 -513.522,07 Institutional B Shares -392.882,35 -14.175,96 b) Administration and accounting management -38.385,25 -35.187,72 E. Administrative expenses (-) -224,97 -211,82 F. Formation and organisation expenses (-) -2.696,11 -4.325,86 G. Remuneration, social security charges and
pension -2,67 -8,16
H. Services and sundry goods (-) -6.644,63 -8.489,47 J. Taxes Classic Shares -11.452,24 -13.763,13 Institutional B Shares -4.282,32 4.497,75 K. Other expenses (-) -29.906,88 -21.301,94
Income and expenditure for the period Subtotal II + III + IV 950.583,65 1.004.458,14
V. Profit (loss) on ordinary activities before tax 5.081.157,45 -7.435.702,49
VII. Result for the period 5.081.157,45 -7.435.702,49
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 5.232.216,19 -4.888.975,39 Profit (loss) brought forward from the previous
financial year 3.467.103,76
Profit for the period available for appropriation 5.081.157,45 -7.435.702,49 Income on the creation of shares (income on the
cancellation of shares) 151.058,74 -920.376,66
II. (Appropriations to) Deductions from capital -5.153.324,62 4.940.406,88
IV. (Dividends to be paid out) -78.891,57 -51.431,49
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND HIGH DIVIDEND EUROZONE
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Shares
Exchange-listed shares
Austria
RAIFFEISEN BANK INTL - 71.178,00 EUR 31,455 2.238.903,99 4,58 4,56
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND HIGH DIVIDEND
EUROZONE (IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 42.795.894,24 39.926.881,68 82.722.775,92 Sales 25.196.783,22 30.583.038,24 55.779.821,46 Total 1 67.992.677,46 70.509.919,92 138.502.597,38 Subscriptions 33.570.458,89 31.037.792,14 64.608.251,03 Redemptions 16.089.660,61 29.987.183,85 46.076.844,46 Total 2 49.660.119,50 61.024.975,99 110.685.095,49 Monthly average of total assets
34.224.240,24 42.308.370,96 38.298.642,12
Turnover rate 53,57 % 22,42 % 72,63 %
1st half of year 2nd half of year YearPurchases 42.795.894,24 39.926.881,68 82.722.775,92 Sales 25.196.783,22 30.583.038,24 55.779.821,46 Total 1 67.992.677,46 70.509.919,92 138.502.597,38 Subscriptions 33.570.458,89 31.037.792,14 64.608.251,03 Redemptions 16.089.660,61 29.987.183,85 46.076.844,46 Total 2 49.660.119,50 61.024.975,99 110.685.095,49 Monthly average of total assets
31.422.035,15 40.975.220,02 37.482.317,45
Corrected turnover rate 58,34 % 23,15 % 74,22 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 911.791,45 911.791,45 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 10.345.437,52 0,00
2012 - 12 57.617.582,33 36.419.759,92
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 10.428.850,39 295,28
2012 - 12 35.005.626,16 352,66
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0947326246 EUR 19.26% 1.59% -6.16% 27/07/2007 -6.24%
DIV BE0947325230 EUR 19.14% 1.55% -6.18% 27/07/2007 -6.27%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228916613 EUR 19.27% 25/11/2011 17.60%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 5.22 EUR net (6.96 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.808% Classic Shares Capitalization: 1.758% Institutional B Shares Capitalization: 1.754% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 2,732 1,541 56.39%
CSFBSAS 15,358 9,493 61.81%
DEUTSCHE 19,510 11,657 59.75%
EQ CSA MACQUARIE 4,127 2,577 62.45%
MERRILL 9,816 5,845 59.55%
MORGAN STANLEY 16,375 9,936 60.67%
NOMURA 17,060 10,325 60.52%
SOCGEN 40 20 50.00%
UBSWDR 9,137 5,711 62.50%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. Kleinwort Benson Investors Dublin Ltd receives a fee of max. 0.5% from KBC Fund Management Limited calculated on that part of the portfolio that it manages, without the total management fee received by KBC Fund Management Limited being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 43.159,09 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
RAIFFEISEN BANK INTL EUR 26.850 31,455 844.566,75
Total 844.566,75
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FRANCE 2003 2,25% 25/07/2020 EUR 317.000 EUR 461.251,80
OAT FRANCE 2006 3 1/4% 25/04/16 EUR 143.000 EUR 160.233,36
FRANCE - 08/14 3.00% 12/07 EUR 274.000 EUR 290.306,29
Total 911.791,45 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Quant Europe
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND QUANT EUROPE
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 28 September 2007 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 268.08 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions. Derivatives may be used to partially hedge the open exchange risk in relation to the reference currency (euro). Where appropriate, they may therefore limit the foreign exchange risk expressed in euros, and hence the market risk and performance risk too. Derivatives are liquid and readily negotiable instruments. They do not, therefore, affect the liquidity risk. Derivatives are also used in accordance with the investment policy and strategy. They do not affect the market, performance and concentration risks or the risks associated with external factors or of any kind.
Strategy selected The assets are invested primarily in European shares. The stock picking is based on a series of quantitative models. Developed by KBC Asset Management, these models evaluate shares by sector on the basis of quantitative criteria, mainly fundamental data on the company, such as the price/earnings ratio, and price data, such as the historical return. The basic principle behind these models is that share prices do not always accurately reflect the fundamental value of the company concerned, but that this value can be estimated provided that enough information is available and that it can be processed efficiently.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Doubts about the sustainability of the economic recovery continued to dominate the investment climate in the past period under review. In Europe the debt crisis continued to rage unabated. Five euro countries needed a bail-out from the European emergency funds. Greece twice reached an agreement during the year with its private sector creditors concerning a rescheduling of its bond debts. Spain came into the spotlight. Mario Draghi, the President of the European Central Bank, managed however to convince the market that the continuing existence of the euro was not at issue. Fortunately, this was offset to some extent by the boom in Asia. In the EMU real GDP shrank by 0.3% y-o-y. The austerity programme and credit restrictions pushed Southern Europe into a deep recession. Germany fulfilled its traditional role as locomotive of the European economy to a lesser extent than in the recent past. Greater divergence within Europe resulted in a further decline in unemployment in Germany and an alarmingly rapid rise in unemployment in countries such as Greece, Spain and Portugal. Belgium was closer to the strong core of the euro area than to the weak periphery. Market performance was consequently dictated in 2012 by volatile sentiment. During the first three months the markets were buoyed by relative economic optimism. After the market eased in April and May, a fine rally was built up from early June onwards, in disregard of the worsening economic signals. On 31 December the MSCI All Countries (the broadest world index) in euros was 14.5% higher than at the end of 2011. Among the traditional markets, Western Europe (MSCI Europe index return for the same period +18.4%) managed to offset some of the underperformance built up since the euro crisis flared up in autumn 2009, despite the continuing influence of certain problem files. Evidently the underperformance of European shares had seen such a valuation gap open up against US shares that new episodes in the euro crisis lacked the same impact on the trading floor. Wall Street closed the year up substantially up on balance (S&P500: +13.4%, Dow Jones: +7.3%), while European investors also benefited from the small increase in value of the dollar (MSCI USA return in euros: +13,9%). The BEL 20 rose by 18.8%, more or less in line with the performance of other European stock markets. The Belgian banking stocks KBC and Ageas recorded the best performance, while Solvay and AB InBev, which has taken over the Mexican market leader Modelo, were once again star performers. D’Ieteren, Mobistar and especially Delhaize, which is grappling with structural problems in its two main markets, were the most important underperformers during the period under review.
2.1.8 FUTURE POLICY In Europe the budgetary plans, the banks' tighter lending policy and the high level of uncertainty among consumers and producers will continue to weigh on growth. The first half of the year could therefore see a further contraction in European GDP. Recovery is not anticipated until the second half of the year. Deflation or depression scenarios, which are currently dominating bond market sentiment, are not however justified. The crisis has also brought the realisation that economic governance, as it is now called in Eurospeak, needs to be tackled as a matter of urgency. In concrete terms, this involves measures such as supranational supervision of banks, strict monitoring and sanctioning of budgetary policy, monitoring of pay policy and harmonising European taxation. During the coming months the organisation of the ESM (European Stability Mechanism, which came into operation from 1 October 2012) the installation of the pan-European banking supervision within the ECB (to be in place by 1 March 2014) and the implementation of the Fiscal Stability Treaty (in force since 1 January 2013) will continue to demand considerable energy and diplomatic dexterity. No delays can be permitted in this work to set up a new architecture for the EMU. Since it may be argued that money market rates will not rise rapidly and that bond rates are at an historical low, everything would appear to point to shares as the most interesting investment alternative in the coming months. The lack of alternatives is not, of course, sufficient reason to increase the market valuation. For that to happen, investors will need to be more predisposed to taking risk. The present valuation prices in very gloomy scenarios. Based on forecast earnings for 2013, the price-earnings ratio (PE) is 13.5 for the US S&P 500 index and 11.4 for the MSCI Europe. That is 25% and 30% respectively lower than the historical average. Equities are certainly dirt-cheap compared with bonds. The earnings yield – the inverse of the price/earnings ratio – is currently 8.7% for the MSCI Europe, an unprecedented premium of some 740 basis points above German bond yields.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 47.744.281,83 25.304.106,03
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 108.020,80 127.876,50 a} Collateral received in the form of bonds 96.819,48 638.254,91 C. Shares and similar instruments a) Shares 44.437.395,75 25.284.139,57 Of which securities lent 89.127,34 2.340.377,03 D. Other securities 860,31 4.601,79 F. Derivative financial instruments m) Financial indices Futures and forward contracts (+/-) -31.757,77 6.840,00
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 1.817,75 b) Tax assets 7.836,36 2.663,28 c) Collateral 127.530,00 10.386,00 B. Payables a) Accounts payable (-) -18.994,81 -29.404,98 c) Borrowings (-) -1.696,43 -288.237,78 d) Collateral (-) -96.819,48 -638.254,91
V. Deposits and cash at bank and in hand A. Demand balances at banks 3.122.116,30 105.828,09
VI. Accruals and deferrals A. Expense to be carried forward -2.499,11 B. Accrued income 42.313,64 143.408,32 C. Accrued expense (-) -51.160,07 -61.495,65
TOTAL SHAREHOLDERS' EQUITY 47.744.281,83 25.304.106,03
A. Capital 28.880.529,61 12.306.827,96
B. Income equalization 33.729,87 -2.472.214,62
C. Profit(Loss) carried forward 12.997.278,07 46.077.446,04
D. Result for the period 5.832.744,28 -30.607.953,35
I.A.B Cash at bank and in hand/deposits 127.530,00 10.386,00
III Notional amounts of futures and forward contracts
III.A Purchased futures and forward contracts 3.430.140,83 138.480,00
IX Financial instruments lent 89.127,34 683.219,50
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -19.855,70 144,80 C. Shares and similar instruments a) Shares 4.817.542,87 -31.125.188,13 D. Other securities -12.730,24 547,06 E. Open-end undertakings for collective investment -414.485,41 F. Derivative financial instruments l) Financial indices Futures and forward contracts -33.962,76 -1.765.090,09 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 498.380,11 836.583,55
II. Investment income and expenses A. Dividends 1.205.883,61 4.478.770,10 B. Interests a) Securities and money market instruments 21.347,43 195.580,37 b) Cash at bank and in hand and deposits 13.289,49 29.311,75 c) Collateral (+/-) 1,31 C. Interest on borrowings (-) -2.727,78 -14.404,63
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
184.536,56 29.023,06
B. Other 21.165,56
IV. Operating expenses A. Investment transaction and delivery costs (-) -156.540,61 -652.718,65 B. Financial expenses (-) -504,08 -7.911,95 C. Custodian's fee (-) -17.792,95 -139.973,45 D. Manager's fee (-) a) Financial management Classic Shares -19.015,96 -1.779.056,02 Institutional B Shares -559.542,75 -38.606,35 b) Administration and accounting management -44.439,96 -127.300,53 F. Formation and organisation expenses (-) -2.531,57 -15.321,49 G. Remuneration, social security charges and
pension -3,08 -37,33
H. Services and sundry goods (-) -6.723,60 -30.639,43 J. Taxes Classic Shares -1.006,65 -43.283,78 Institutional B Shares -5.954,21 32.976,17 K. Other expenses (-) -24.903,89 -78.039,84
Income and expenditure for the period Subtotal II + III + IV 583.370,00 1.859.534,87
V. Profit (loss) on ordinary activities before tax 5.832.744,28 -30.607.953,35
VII. Result for the period 5.832.744,28 -30.607.953,35
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 18.863.752,22 12.997.278,07 Profit (loss) brought forward from the previous
financial year 12.997.278,07 46.077.446,04
Profit for the period available for appropriation 5.832.744,28 -30.607.953,35 Income on the creation of shares (income on the
cancellation of shares) 33.729,87 -2.472.214,62
II. (Appropriations to) Deductions from capital -18.863.752,22
III. Profit (loss) to be carried forward 12.997.278,07
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND QUANT EUROPE
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND QUANT EUROPE (IN
THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 30.837.942,87 20.329.735,50 51.167.678,36 Sales 18.224.565,52 19.339.464,79 37.564.030,30 Total 1 49.062.508,38 39.669.200,28 88.731.708,67 Subscriptions 29.759.570,74 23.147.904,10 52.907.474,84 Redemptions 17.379.319,76 18.893.313,05 36.272.632,81 Total 2 47.138.890,50 42.041.217,15 89.180.107,65 Monthly average of total assets
37.994.399,74 45.467.308,85 41.807.108,47
Turnover rate 5,06 % -5,22 % -1,07 %
1st half of year 2nd half of year YearPurchases 30.837.942,87 20.329.735,50 51.167.678,36 Sales 18.224.565,52 19.339.464,79 37.564.030,30 Total 1 49.062.508,38 39.669.200,28 88.731.708,67 Subscriptions 29.759.570,74 23.147.904,10 52.907.474,84 Redemptions 17.379.319,76 18.893.313,05 36.272.632,81 Total 2 47.138.890,50 42.041.217,15 89.180.107,65 Monthly average of total assets
34.943.104,16 -215.442.040,60 -3.136.315,19
Corrected turnover rate 5,50 % 1,10 % 14,30 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
Capitalization Distribution Capitalization Distribution
2011 - 12 50.445.092,37 28.906.414,80
2012 - 12 51.322.132,98 35.022.400,50
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 24.394.789,45 298,01
2012 - 12 46.338.548,18 350,93
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0947465663 EUR 17.21% 4.16% -5.54% 28/09/2007 -6.60%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228905509 EUR 17.47% 24/11/2011 27.36%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Capitalization: 1.95% Institutional B Shares Capitalization: 1.711% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 7,185 4,425 61.58%
CSFBSAS 17,950 10,886 60.65%
DEUTSCHE 19,868 12,066 60.73%
EQ CSA MACQUARIE 1,616 1,010 62.50%
MORGAN STANLEY 8,042 5,404 67.19%
NOMURA 6,282 3,926 62.50%
SOCGEN 99 49 50.00%
UBSWDR 6,034 3,416 56.62%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek. Financial derivatives on financial indices The following financial indices were used as the underlying for financial derivatives: The Euro Stoxx 50 is a weighted equity index computed by Stoxx Ltd. The dividend is not reinvested. The main purpose of this index is to provide a continuous indication of market trends on the European stock markets. The base value of the index is 1000, calculated on the basis of the underlying prices recorded on 31 December 1991. The Euro Stoxx 50 consists solely of shares from countries participating in the Economic and Monetary Union, with the exception of Luxembourg. On 10 April 1998, the following stock exchanges were included in the index: Austria (Vienna), Belgium (Brussels), Finland (Helsinki), France (Paris), Germany (Frankfurt), Italy (Milan), Ireland (Dublin), the Netherlands (Amsterdam), Portugal (Lisbon) and Spain (Madrid). The index consists of the 50 largest European shares in terms of shares that are freely negotiable, and the shares are accordingly weighted on the basis of this criterion. The Euro Stoxx 50 is published daily in L’Echo, De Tijd, The Financial Times and The Wall Street Journal Europe. Stoxx Limited has all proprietary rights with repect to the index. In no way Stoxx Limited endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Stoxx Limited disclaims any liability for the issue and offering of the shares of this undertaking for collective investment.
The FTSE 100 is an equity index computed by the Financial Times Ltd. The dividend is not reinvested. It comprises 100 shares. The FTSE 100 serves primarily as a continuous indicator of market trends on the UK stock market. The value of the FTSE 100 is based on the market value of the shares of 100 companies listed on the London Stock Exchange. These are the companies with the biggest market capitalisation, and the shares are weighted accordingly. The base value of the index is 1000, calculated on the basis of the underlying prices recorded on 3 January 1984. The FTSE 100 is published daily in the leading financial newspapers, i.e. The Financial Times and The Wall Street Journal Europe. In Belgium, the index is published in De Tijd and L’Echo. Financial Times Ltd has all proprietary rights with repect to the index. In no way Financial Times Ltd endorses, sponsors or is otherwise involved in the issue and offering the shares of this undertaking for collective investment. Financial Times Ltd disclaims any liability for the issue and offering of the shares of this undertaking for collective investment. The value and, if available for distribution, the composition of the aforementioned financial indices may be obtained from the branches providing the financial service. Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to -16.522,30 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
IBERDROLA SA EUR 13.719 4,195 57.551,20
LUNDBERGS AB -B- SEK 1.178 229,900 31.576,14
Total 89.127,34
Details of collateral received for securities lent
Name Currency Nominal value Currency fund Value in Currency fund
FRANCE - 04/55 4.00 % 25/04 EUR 79.000 EUR 96.819,48
Total 96.819,48 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund High Dividend New Markets
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND HIGH DIVIDEND NEW MARKETS
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 28 September 2007 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 370.52 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions. Derivatives may be used to partially hedge the open exchange risk in relation to the reference currency (euro). Where appropriate, they may therefore limit the foreign exchange risk expressed in euros, and hence the market risk and performance risk too. To the extent that derivatives are used, it concerns liquid and readily negotiable instruments. They do not, therefore, affect the liquidity risk. To the extent that derivatives are used, they are used to carry out the investment policy and within the limits of the investment strategy. They do not affect the market, performance and concentration risks or the risks associated with external factors or of any kind.
Strategy selected The assets are invested primarily in shares with a high dividend yield of companies in countries where conditions are such as to ensure accelerated economic growth in the short or medium term, more specifically countries in Asia, Latin America, Central Europe and Eastern Europe. Risk concentration Emerging market shares.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT The management company has delegated the intellectual management, to KBC Fund Management Limited, Joshua Dawson House, Dawson Street , Dublin 2, IRELAND.. KBC Fund Management Limited has delegated the intellectual management, to Kleinwort Benson Investors Dublin Ltd, Joshua Dawson House Dawson Street , Dublin 2, IRELAND.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR Introduction: The KBC Equity Fund High Dividend New Markets Fund invests primarily in emerging market shares that achieve a higher-than-average dividend yield within their industry and region. Dividend yield is not only an important valuation criterion for shares; it also provides a basic return. The fund avoids classic style exposure through industry group and regional neutrality. Focussing on the high dividend theme, we aim to achieve a neutral industry group allocation. This means that we look for shares with higher-than-average dividend yields and equity scores in every sector. Consequently, there are also shares in the portfolio that appear at first sight to have a low dividend yield. Summary of Performance: The two main performance drivers for this fund are the high dividend theme and stock-picking. 1) Theme: Emerging markets had a very strong start to the year out-performing global developed markets by approximately 240 basis points in Q1. In Euro terms, the MSCI World TR Index was up +8.9%, while the MSCI EM TR Index was up +11.3% for the 3 month period. EMEA was by far the best performing region as fears over the Euro crisis subsided, rising by 13% over the quarter. The best performing countries in MSCI EM were Egypt, Turkey and Hungary all located in the EMEA region. Latin America wasn’t too far behind at +11.8% and Asia performed admirably at 10.5% A closer look at absolute returns show that January and February were particularly strong. Emerging countries out-performed developed markets with ample liquidity and attractive valuations being the key themes. However in March, we saw a small reversal, as momentum faded based on worries over Chinese growth and some hawkish commentary from EM central banks. The theme of high dividend struggled just like it did in the developed world as investors piled back into the markets driving stock prices up considerably. The worst performing industries in EM over the 3 months of Q1 were Telecoms, Utilities and Energy, all traditional high dividend payers. In Q2 the theme of high dividend performed similarly to that which we witnessed in developed markets – very strong in traditional high dividend industries like real estate, pharmaceuticals and food, beverage & tobacco. However as you moved away from these industries, higher dividend stocks did not perform as well. Therefore our regional and industry group neutral version of the theme added little value to the performance of the fund. EM markets rebounded strongly during Q3. They lagged only European markets in terms of best performing regions throughout the globe. Internally Asia and EMEA were very strong performers with Latin America bringing up the rear despite solid performance. In terms of the theme we witnessed a mixed quarter. In total, it detracted from performance by a small margin. Overall one would assume that there were no clear trends but there were large swings in styles intra-quarter. When risk was “on” and markets were moving steadily upwards, the theme tended to struggle, underperforming the MSCI Emerging Markets Index. When we witnessed some weakness in the markets (especially evident during August), the theme outperformed strongly. This is how we expect the more defensive make up of the theme to act. As a rule Q4 2012 was a good environment for high dividend investing. Industries like financials and materials offer strong DY’s and with the continued rotation into these sectors, the theme of high dividends thrived. Our all industry all region approach to constructing the theme will have added value to our overall performance. 2) Stock-picking: On an overall basis, our stock picking in Emerging Markets added value during 2012 although quarter on quarter stock picking performance was a mixed bag. On a regional level the Latin American region was by far, our best contributor to performance. Emerging markets performed very positively during 2012 particularly in Emerging Asia and Emerging Europe. Latin American markets were weaker albeit positive and this is where we achieved the bulk of our stock picking added value. We managed to avoid many of the big losers predominantly during Q2 especially in Brazil. Being underweight stocks like Petrobras, ItauUnibanco and OGX Petroleo added significant value to our stock picking.
Stock-picking was mildly negative during the second half of 2012 which detracted from our relative performance. Given our focus on stocks that generate consistent dividends over the long term we tend to have a bias towards stocks with high return on equity and high return on invested capital. We believe that such companies will prosper in a moderate growth environment. However when monetary policy is eased investors tend to invest in the lower quality segment of the market in the belief that such companies will be given the opportunity to participate in the recovery. During such a rally high quality names will tend to lag the market and that was a feature during the latter weeks of the quarter. We achieved positive relative performance over the year particularly in Media, Retailing, Semi-Conductor & Semi-Conductor Equipment and Household & Personal Products industry groups.
2.1.8 FUTURE POLICY There was a significant re-rating of emerging markets in 2012 as earnings were broadly unchanged over the year. Large earnings downgrades occurred in Latin America and EMEA. The key factors in 2013 will be economic growth across the region and earnings momentum. As we enter 2013 we anticipate that companies will manage margins in a more efficient manner with an increased emphasis on balance sheet management. Overall Emerging Markets still are taking their lead from the fragile and volatile macro background especially in developed markets, and the pivotal support role played by global authorities will remain necessary. Stock picking will be increasingly important as those companies that continue to deliver solid earnings above the more anaemic economic growth levels will continue to be rewarded. The search for yield and income will remain a prevalent theme so a key focus for stock picking should be on companies that are delivering high, growing, and sustainable dividends.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 213.636.044,41 93.626.171,45
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds a} Collateral received in the form of bonds 5.492.361,36 605.066,21 C. Shares and similar instruments a) Shares 203.548.909,45 91.574.839,79 Of which securities lent 4.893.830,52 1.365.319,14 D. Other securities 454,34 E. Open-end undertakings for collective investment 8.214.067,25 2.453.115,11
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 167.950,05 9.398,38 B. Payables a) Accounts payable (-) -177.971,31 -58.201,56 c) Borrowings (-) -96.699,55 -430.421,50 d) Collateral (-) -5.492.361,36 -605.066,21
V. Deposits and cash at bank and in hand A. Demand balances at banks 1.716.011,86 94.584,27
VI. Accruals and deferrals A. Expense to be carried forward 7.607,53 B. Accrued income 507.066,56 130.299,33 C. Accrued expense (-) -243.289,90 -155.504,24
TOTAL SHAREHOLDERS' EQUITY 213.636.044,41 93.626.171,45
A. Capital 194.571.668,87 99.091.084,09
B. Income equalization 500.503,13 -2.953.661,93
C. Profit(Loss) carried forward 32.512.256,86
D. Result for the period 18.563.872,41 -35.023.507,57
IX Financial instruments lent 4.893.830,52 1.365.319,14
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments C. Shares and similar instruments a) Shares 16.820.901,23 -27.481.818,23 D. Other securities -626,02 -43.509,08 E. Open-end undertakings for collective investment 730.220,76 -1.794.040,73 G. Receivables, deposits, cash at bank and in hand
and payables -0,04
H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions -3.575.799,87 -8.486.511,64
II. Investment income and expenses A. Dividends 7.557.769,65 5.943.391,36 B. Interests a) Securities and money market instruments 100.392,42 60.171,50 b) Cash at bank and in hand and deposits 13.455,72 8.395,84 C. Interest on borrowings (-) -24.447,30 -13.495,40
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
913.475,75 66.714,32
B. Other 4.095,67
IV. Operating expenses A. Investment transaction and delivery costs (-) -826.369,47 -704.038,86 B. Financial expenses (-) -2.076,77 -24.046,54 C. Custodian's fee (-) -80.813,32 -147.944,40 D. Manager's fee (-) a) Financial management Classic Shares -333.354,33 -1.986.924,07 Institutional B Shares -2.347.855,19 -142.707,45 b) Administration and accounting management -182.060,89 -138.284,29 E. Administrative expenses (-) -404,30 -227,65 F. Formation and organisation expenses (-) -12.555,43 -15.492,27 G. Remuneration, social security charges and
pension -13,77 -34,21
H. Services and sundry goods (-) -28.290,03 -30.820,39 J. Taxes Classic Shares -17.532,91 -73.025,86 Institutional B Shares -22.316,13 41.957,31 K. Other expenses (-) -117.827,35 -65.312,50
Income and expenditure for the period Subtotal II + III + IV 4.589.176,35 2.782.372,11
V. Profit (loss) on ordinary activities before tax 18.563.872,41 -35.023.507,57
VII. Result for the period 18.563.872,41 -35.023.507,57
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 19.064.375,54 -5.464.912,64 Profit (loss) brought forward from the previous
financial year 32.512.256,86
Profit for the period available for appropriation 18.563.872,41 -35.023.507,57 Income on the creation of shares (income on the
cancellation of shares) 500.503,13 -2.953.661,93
II. (Appropriations to) Deductions from capital -18.948.820,17 5.570.293,09
IV. (Dividends to be paid out) -115.555,37 -105.380,45
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND HIGH DIVIDEND NEW MARKETS
Name Quantity on 31/12/2012
Cur rency
Price in currency
Evaluation (in the currency of the
sub-fund)
% owned by
UCI
% portfolio
% Net
assets
NET ASSETS
SECURITIES PORTFOLIO
Investment funds
Open-end funds
UCITS registered with the FSMA
Belgium
HORIZON ACCESS INDIA FD KAP 10.267,00 USD 1.054,780 8.214.067,25 7,05 3,88 3,85
Total investment funds 8.214.067,25 3,88 3,85
Shares
Exchange-listed shares
Brazil
AMBEV-CIA DE BEBIDAS DAS AMERICAS PREF 111.200,00 BRL 85,580 3.525.280,98 1,67 1,65
ARTERIS SA - 122.200,00 BRL 18,950 857.821,82 0,41 0,40
2.4.2 CHANGES IN THE COMPOSITION OF THE ASSETS OF KBC EQUITY FUND HIGH DIVIDEND NEW
MARKETS (IN THE CURRENCY OF THE SUB-FUND)
1st half of year 2nd half of year Year Purchases 141.609.659,56 145.334.850,50 286.944.510,07 Sales 71.229.279,97 111.880.769,10 183.110.049,06 Total 1 212.838.939,53 257.215.619,60 470.054.559,13 Subscriptions 130.204.501,25 121.408.776,46 251.613.277,71 Redemptions 62.131.097,33 87.579.304,24 149.710.401,57 Total 2 192.335.598,58 208.988.080,70 401.323.679,28 Monthly average of total assets
165.726.530,68 197.332.747,53 181.924.716,81
Turnover rate 12,37 % 24,44 % 37,78 %
1st half of year 2nd half of year YearPurchases 141.609.659,56 145.334.850,50 286.944.510,07 Sales 71.229.279,97 111.880.769,10 183.110.049,06 Total 1 212.838.939,53 257.215.619,60 470.054.559,13 Subscriptions 130.204.501,25 121.408.776,46 251.613.277,71 Redemptions 62.131.097,33 87.579.304,24 149.710.401,57 Total 2 192.335.598,58 208.988.080,70 401.323.679,28 Monthly average of total assets
173.243.269,56 188.455.077,57 171.556.997,36
Corrected turnover rate 11,84 % 25,59 % 40,06 %
The table above shows the capital volume of portfolio transactions. This volume (adjusted to take account of total subscriptions and redemptions) is also compared to the average net assets at the beginning and end of the period. A figure close to 0% implies that the transactions relating to the securities or transactions relating to the assets (excluding deposits and cash) in a given period only involve subscriptions and redemptions. A negative percentage shows that subscriptions and redemptions entailed few, if any, transactions in the portfolio. Active asset management may result in high turnover rates (monthly percentage >50%). The detailed list of transactions is available for consultation free of charge at the registered office of the Bevek or fund at Havenlaan 2, 1080 Brussels.
2.4.3 AMOUNT OF COMMITMENTS IN RESPECT OF FINANCIAL DERIVATIVES POSITIONS
NAME Currency Value in currency
In the currency of the sub-fund
Lot-size
Transactiondate
KBC COLLATERAL EUR
EUR 5.492.361,36 5.492.361,36 N/A 31.12.2012
2.4.4 CHANGES OF THE NUMBER OF SUBSCRIPTIONS AND REDEMPTIONS AND THE NET ASSET
Capitalization Distribution Capitalization Distribution
2011 - 12 84.128.986,05 14.482.250,22
2012 - 12 242.823.963,72 142.609.296,10
Period Net asset value
End of period (in the currency of the class)
Year Of the class Of one share
Capitalization Distribution
2011 - 12 74.782.571,76 399,49
2012 - 12 190.448.009,29 464,31
2.4.5 PERFORMANCE FIGURES
Classic Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE0947467685 EUR 15.41% 7.43% -0.06% 28/09/2007 -1.49%
DIV BE0947466679 EUR 15.47% 7.46% -0.05% 28/09/2007 -1.48%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Institutional B Shares
Cap Div
ISIN code Cur-
rency
1 Year 3 Years* 5 Years* 10 Years* Since launch*
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Share classes
Bench mark
Launch Date
Share classes
CAP BE6228915607 EUR 15.55% 25/11/2011 22.33%
Risk warning: Past performance is not a guide to future performance. * Return on annual basis.
Classic Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. In the case of units that pay dividends, the dividend is incorporated geometrically in the return.
Calculation method for date D, where NAV stands for net asset value: Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
Distribution units (DIV) Return on date D over a period of X years:
[ C * NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [ C * NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D where C is a factor that is determined for all N dividends between the calculation date D and the reference date.
For dividend i on date Di with value Wi: Ci = [Wi / NIW(Di)] + 1 i = 1 ... N from whichC = C0 * .... * CN.
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalisation and distribution shares.
Institutional B Shares The bar chart shows the performance for full financial years. The figures do not take account of any restructuring. Calculated in EUR. The return is calculated as the change in the net asset value between two dates expressed
as a percentage. Calculation method for date D, where NAV stands for net asset value:
Capitalisation units (CAP) Return on date D over a period of X years:
[NIW(D) / NIW(Y)] ^ [1 / X] - 1 where Y = D-X
Return on date D since the start date S of the unit: [NIW(D) / NIW(S)] ^ [1 / F] - 1 where F = 1 if the unit has existed for less than one year on date D where F = (D-S) / 365.25 if the unit has existed for longer than one year on date D
If the interval between the two dates exceeds one year, the ordinary return calculation is converted into a return on an annual basis by taking the nth square root of 1 plus the total return of the unit.
The return figures shown above do not take account of the fees and charges associated with the issue and redemption of units.
These are the performance figures for capitalization shares.
Dividend on ex-dividend date 28/03/2013: 7.62 EUR net (10.16 EUR gross).
2.4.6 COSTS Total expense ratio (TER): * Classic Shares Distribution: 1.765% Classic Shares Capitalization: 1.815% Institutional B Shares Capitalization: 1.796% * The following costs have not been included in the TER: - Transaction charges - Interest payments on loans taken out - Payments in respect of financial derivatives - Fees and charges paid directly by the investor - Any soft commissions
SOFT COMMISSIONS The management company or the appointed manager, as the case may be, is the recipient of soft commissions. The recipient has laid down an internal policy as regards accepting soft commissions and avoiding possible conflicts of interest in this respect, and has put appropriate internal controls in place to ensure this policy is observed. For more information, please see the ‘General’ section of the annual report.
Broker
Commission gross
in EUR
paid during the period:
1‐01‐12
‐
31‐12‐12
CSA Credits
in EUR
accrued during the period:
1‐01‐12
‐
31‐12‐12 Percentage
CITI 79,795 47,755 59.85%
CSFBSAS 17,678 11,277 63.79%
DEUTSCHE 1,740 838 48.13%
EQ CSA MACQUARIE 3,588 2,115 58.95%
HSBC 2,127 481 22.59%
MERRILL 7,281 4,551 62.50%
MORGAN STANLEY 14,052 6,922 49.26%
NOMURA 191,514 113,767 59.40%
UBSWDR 10,560 6,680 63.26%
WOOD 5,450 1,171 21.48%
FEE-SHARING AGREEMENTS AND REBATES: The management company may share its fee with the distributor, and institutional and/or professional parties. In principle, the percentage share amounts to between 35% and 60% if the distributor is an entity of KBC Group NV or to between 35% and 70% if the distributor is not an entity of KBC Group NV. However, in a small number of cases, the distributor’s fee is less than 35%. Investors may, on request, obtain more information on these cases. If the management company invests the assets of the undertaking for collective investment in units of undertakings for collective investment that are not managed by an entity of KBC Group NV, and receives a fee for doing so, it will pay this fee to the undertaking for collective investment. Fee-sharing does not affect the amount of the management fee paid by the sub-fund to the management company. This management fee is subject to the limitations laid down in the articles of association. The limitations may only be amended after approval by the general meeting of shareholders. The management company has concluded a distribution agreement with the distributor in order to facilitate the wider distribution of the sub-fund's units by using multiple distribution channels. It is in the interests of the holders of units, the sub-fund and of the distributor for the largest possible number of units to be sold and for the assets of the sub-fund to be maximised in this way. In this respect, there is therefore no question of any conflict of interest.
2.4.7 NOTES TO THE FINANCIAL STATEMENTS AND OTHER DATA Fee for managing the investment portfolio: 1.5% per annum calculated on the basis of the average total net assets of the sub-fund, no management fee is charged on assets assets invested in investment undertakings managed by a financial institution of the KBC group. KBC Fund Management Limited receives a fee from the management company of max. 1.5% calculated on that part of the portfolio that it manages, without the total management fee received by the management company being exceeded. Kleinwort Benson Investors Dublin Ltd receives a fee of max. 0.5% from KBC Fund Management Limited calculated on that part of the portfolio that it manages, without the total management fee received by KBC Fund Management Limited being exceeded. The administration agent’s fee is payable at the end of each month and is calculated on the basis of the average total net assets of the sub-fund. Auditor's fee: 1 700 EUR per year. This fee is not including VAT and will be increased at the end of the 3-year mandate. The custody fee is calculated on the value of the securities held in custody by the custodian on the final banking day of the preceding calendar year, except on those assets invested in investment undertakings managed by a financial institution of the KBC group. The custody fee is paid at the beginning of the calendar year. Social, ethical and environmental aspects: No manufacturers of controversial weapons whose use over the past five decades, according to the international consensus, has led to disproportionate human suffering among the civilian population will be included in the portfolio of investments. This involves the manufacturers of anti-personnel mines, cluster bombs and munitions and weapons containing depleted uranium. In this way, the sub-fund seeks to reflect not only simple financial reality but also the social reality of the sector or region in question. Exercising voting rights If necessary, relevant and in the interest of the shareholders, the management company will exercise the voting rights attached to the shares in the Bevek’s portfolio. The management company will adhere to the following criteria when determining how it stands relative to the items on the agenda that are put to the vote: - Shareholder value may not be adversely affected. - Corporate governance rules, especially with regard to the rights of minority shareholders, must be
respected. - The minimum standards with regard to sustainable business and corporate social responsibility
must be met. The list of companies for which voting rights are exercised is available at the registered office of the Bevek.
Name Maximum management fee Horizon-Access India Fund-Classic Shares 1,60 KBC Equity Fund-High Dividend New Markets-Classic Shares 1,50 KBC Equity Fund-High Dividend New Markets-Institutional B Shares 1,50
Securities lending In accordance with the Royal Decree of 7 March 2006 concerning securities lending, the undertaking for collective investment has taken out securities loans with a principal to whom the full title of the loaned securities was transferred, without recording this transfer of ownership in the accounts. For the period from 1 January 2012 to 31 December 2012, the fee for securities lent comes to 120.893,49 EUR. KBC Asset Management NV receives 50% of the net fee received for securities lent. The detailed list of securities lending transactions carried out can be obtained from the registered office of the collective investment undertaking at 2 Havenlaan, 1080 Brussels.
Overview of securities lent as at 31/12/2012
Name Currency Quantity Price Value in currency of the portfolio
GREAT WALL MOTOR CO LTD -H- HKD 334.092 24,450 799.372,66
FRANCE 2003 2,25% 25/07/2020 EUR 46.000 EUR 66.932,44
FRANCE 2004 1,60% 25/07/2015 EUR 695.000 EUR 893.076,39
Total 5.492.361,37 For the valuation of the collateral received, indicative prices have been used in this detail list by the Collateral Management Division of KBC Bank.
Audited annual report as at 31 December 2012
TABLE OF CONTENTS
2. Information on KBC Equity Fund Satellites
2.1. Management report 2.1.1. Launch date and subscription price 2.1.2. Stock exchange listing 2.1.3. Goal and key principles of the investment policy 2.1.4. Financial portfolio management 2.1.5. Distributors 2.1.6. Index and benchmark 2.1.7. Policy pursued during the financial year 2.1.8. Future policy 2.1.9. Synthetic risk and reward indicator (SRRI)
2.2. Balance sheet
2.3. Profit and loss account
2.4. Composition of the assets and key figures
2.4.1. Composition of the assets 2.4.2. Changes in the composition of the assets 2.4.3. Amount of commitments in respect of financial derivatives positions 2.4.4. Changes in the number of subscriptions and redemptions and the net asset value 2.4.5. Performance figures 2.4.6. Costs 2.4.7. Notes to the financial statements and other data
2 INFORMATION ON KBC EQUITY FUND SATELLITES
2.1 MANAGEMENT REPORT
2.1.1 LAUNCH DATE AND SUBSCRIPTION PRICE Classic Shares : Launch date: 30 January 2009 Initial subscription price: 500 EUR Currency: EUR Institutional B Shares : Launch date: 24 November 2011 Initial subscription price: 676.29 EUR Currency: EUR
2.1.2 STOCK EXCHANGE LISTING Not applicable.
2.1.3 GOAL AND KEY PRINCIPLES OF THE INVESTMENT POLICY
SUB-FUND’S OBJECT: The main objective of this sub-fund is to generate the highest possible return for its shareholders by investing directly or indirectly in transferable securities. This is reflected in its pursuit of capital gains and income. To this end, the assets are invested, either directly or indirectly via correlated financial instruments, primarily in shares.
SUB-FUND’S INVESTMENT POLICY:
PERMITTED ASSET CLASSES: The sub-fund may invest in securities, money market instruments, units in undertakings for collective investment, deposits, financial derivatives, liquid assets and all other instruments insofar as permitted by the applicable laws and regulations and consistent with the sub-fund’s object The sub-fund shall invest no more than 10% of its assets in units of other undertakings for collective investment.
RESTRICTIONS OF THE INVESTMENT POLICY: The investment policy will be implemented within the limits set by law and regulations. The sub-fund may borrow up to 10% of its net assets, insofar as these are short-term borrowings aimed at solving temporary liquidity problems.
PERMITTED DERIVATIVES TRANSACTIONS: Derivates may be used either for hedging purposes or to achieve investment objectives. Changes will be made to the investments at regular intervals to comply with the sub-fund's investment strategy. In addition, listed and unlisted derivates may be used to achieve the objectives: these may be forward contracts, options or swaps on securities, indices, currencies or interest rates or other transactions involving derivatives. Unlisted derivatives transactions will only be concluded with prime financial institutions specialised in such transactions. Such derivatives may also be used to hedge the assets against exchange-rate fluctuations. Subject to the applicable laws and regulations and the articles of association, the sub-fund always seeks to conclude the most effective transactions. Derivatives may be used to partially hedge the open exchange risk in relation to the reference currency (euro). Where appropriate, they may therefore limit the foreign exchange risk expressed in euros, and hence the market risk and performance risk too. Derivatives are liquid and readily negotiable instruments. They do not, therefore, affect the liquidity risk.
Derivatives are also used in accordance with the investment policy and strategy. They do not affect the market, performance and concentration risks or the risks associated with external factors or of any kind.
STRATEGY SELECTED At least 75% of the assets are invested, directly or indirectly, in a selection of shares in global companies. The manager has autonomy in the stock picking, which is theme-based. As a result, the sub-fund's investments may at any time be focused to a greater or lesser extent on one or more very specific themes. Some examples of these themes (this list is not exhaustive) are family companies, holding companies with a greater average undervaluation in relation to their intrinsic value, and global companies that generate a significant percentage of their turnover in emerging countries.
THE EUROPEAN SAVINGS DIRECTIVE AND TAX ON DEBT CLAIM RETURNS OBTAINED THROUGH THE
REDEMPTION OF OWN UNITS OR IN THE EVENT OF FULL OR PARTIAL DISTRIBUTION OF EQUITY
CAPITAL. The following information is of a general character and is not intended to cover all aspects of an investment in a UCITS. In certain cases entirely different rules might even apply. Moreover, both tax law and the interpretation of it can change. Investors who wish to have more information about the tax implications – in both Belgium and abroad – of acquiring, holding and transferring units should seek the advice of their usual financial and tax advisers. This UCITS shall invest a maximum of 15% of its assets directly or indirectly in debt instruments as intended by the European Savings Directive. A. European Savings Directive (Directive 2003/48/EC) The European Savings Directive has been implemented in Belgium through: – The Law of 17 May 2004 transposing into Belgian law Directive 2003/48/EC of 3 June 2003 of the Council of the European Union on taxation of savings income in the form of interest payments and amending Income Tax Code 1992 on withholding tax; – The Royal Decree of 27 September 2009 implementing Article 338bis § 2 of Income Tax Code 1992; – The Royal Decree of 27 September 2009 concerning the entry into effect of Article 338bis § 2, paragraphs one to three, of Income Tax Code 1992; Since this UCITS invests a maximum of 15% of its assets directly or indirectly in debt claims as intended by the European Savings Directive, the income of this UCITS does not fall within the scope of this directive. B. Tax on debt claim returns obtained through the redemption of own units or in the event of full or partial distribution of equity capital (Article 19bis Income Tax Code 1992). The income from this UCITS is not subject to the tax on debt instrument returns as intended by Article 19bis, Income Tax Code 1992.
2.1.4 FINANCIAL PORTFOLIO MANAGEMENT There is no delegation of the portfolio.
2.1.5 DISTRIBUTORS KBC Asset Management S.A., 5, Place de la Gare, L-1616 Luxembourg.
2.1.6 INDEX AND BENCHMARK See ‘Sub-fund’s investment policy’.
2.1.7 POLICY PERSUED DURING THE FINANCIAL YEAR KBC Equity Fund Satellites invests primarily in companies selected on a theme basis. Several themes were chosen that are likely to outperform the broad equity market in the medium to long term. At the beginning of the year, KBC Equity Fund Satellites was invested in holdings with a more than average undervaluation compared to their net asset value; businesses with a sufficiently strong market position to be able to set their own selling prices; conservatively managed family businesses; clean energy; companies at which substantial R&D efforts have created clear shareholder value; and structural growth companies. A reasonable sector and regional spread was pursued for the portfolio. KBC Equity Fund Satellites shareholders obtained a positive return (in euros) of more than 21% in 2012. KBC Equity Fund Satellites outperformed the MSCI World thanks to the good relative performance of, among others, Thrombogenics, Richemont and Anheuser-Busch InBev. The positions in BG, Weir, and Microsoft dragged down the fund’s relative performance. Profits were taken in stocks including Cobham, Experian, Imtech, Intertek, Kerry, Kone, Nutreco and Tractebel Energia. The funds released were invested in stocks including Andritz, Berkshire Hathaway, Brenntag, Diasorin, Elekta, Eutelsat, Henkel, Pernod Ricard, SABMiller, Saipem, SAP and Tullow Oil2.1.8 FUTURE POLICY At the beginning of 2013, KBC Equity Fund Satellites was invested in holdings with a more than average undervaluation compared to their net asset value; businesses with a sufficiently strong market position to be able to set their own selling prices; conservatively managed family businesses; clean energy; companies at which substantial R&D efforts have created clear shareholder value; and structural growth companies. These six themes are highly likely to deliver a better performance than the broad equity market in the medium to long term. Consequently, there is still the real prospect of a good relative performance. KBC Equity Fund Satellites will sell themes if the valuation of the underlying businesses is no longer attractive and will invest in new themes if the opportunity arises.
2.1.9 SYNTHETIC RISK AND REWARD INDICATOR Classic Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). Institutional B Shares: 6 on a scale of 1 (lowest risk) to 7 (highest risk). The value of a share can decrease or increase and the investor may not get back the amount invested. In accordance with Commission Regulation (EU) No. 583/2010, a synthetic risk and reward indicator has been calculated. This indicator provides a quantitative measure of the sub-fund's potential return and the risk involved, calculated in the currency in which the sub-fund is denominated. It is given as a figure between 1 and 7. The higher the figure, the greater the potential return, but also the more difficult it is to predict this return. Losses are possible too. The lowest figure does not mean that the investment is entirely free of risk. However, it does indicate that, compared with the higher figures, this product will generally provide a lower, but more predictable return. The synthetic risk and reward indicator is assessed regularly and can therefore go up or down based on data from the past. Data from the past is not always a reliable indicator of future risk and return.
2.2 BALANCE SHEET
Balance sheet layout 31/12/2012 (in the currency of the sub-fundt)
31/12/2011 (in the currency of the sub-fund )
TOTAL NET ASSETS 50.409.447,18 20.248.457,88
II. Securities, money market instruments, UCIs and derivatives
A. Bonds and other debt instruments a) Bonds 86.536,00 102.442,50 C. Shares and similar instruments a) Shares 50.207.355,95 20.191.064,30
IV. Receivables and payables within one year A. Receivables a) Accounts receivable 920,08 3.459,27 b) Tax assets 79.850,31 107.394,06 B. Payables a) Accounts payable (-) -17.502,87 -15.720,42 c) Borrowings (-) -140.048,34
V. Deposits and cash at bank and in hand A. Demand balances at banks 67.767,19 3.399,68
VI. Accruals and deferrals A. Expense to be carried forward -688,25 B. Accrued income 54.317,62 23.043,92 C. Accrued expense (-) -69.797,10 -25.888,84
TOTAL SHAREHOLDERS' EQUITY 50.409.447,18 20.248.457,88
A. Capital 33.877.175,19 10.298.225,13
B. Income equalization 12.287,92 -245.600,45
C. Profit(Loss) carried forward 9.950.232,75 15.810.215,62
D. Result for the period 6.569.751,32 -5.614.382,42
2.3 PROFIT AND LOSS ACCOUNT
Income Statement 31/12/2012 (in the currency of the sub-fund)
31/12/2011 (in the currency of the sub-fund)
I. Net gains(losses) on investments A. Bonds and other debt instruments a) Bonds -15.906,50 116,00 C. Shares and similar instruments a) Shares 6.109.799,86 -5.358.524,13 D. Other securities 40,32 -20,83 F. Derivative financial instruments l) Financial indices Futures and forward contracts 24.940,02 H. Foreign exchange positions and transactions b) Other foreign exchange positions and
transactions 352.624,11 -467.440,71
II. Investment income and expenses A. Dividends 891.686,49 809.279,84 B. Interests a) Securities and money market instruments 46.250,55 5.656,54 b) Cash at bank and in hand and deposits 1.085,47 292,53 C. Interest on borrowings (-) -188,26 -8.188,00
III. Other income A. Income received to cover the acquisition and
realizaion of assets, to discourage withdrawals and for delivery charges
102.040,41 5.697,35
B. Other 5.569,26
IV. Operating expenses A. Investment transaction and delivery costs (-) -226.000,41 -131.119,28 B. Financial expenses (-) -511,75 -1.014,05 C. Custodian's fee (-) -15.548,62 -38.530,44 D. Manager's fee (-) a) Financial management Classic Shares -230.337,61 -387.722,92 Institutional B Shares -341.560,74 -13.506,76 b) Administration and accounting management -44.665,13 -29.069,35 F. Formation and organisation expenses (-) -2.866,84 -3.394,31 G. Remuneration, social security charges and
pension -3,27 -7,96
H. Services and sundry goods (-) -7.094,87 -6.840,51 J. Taxes Classic Shares -16.230,52 -13.064,27 Institutional B Shares -3.853,17 6.275,17 K. Other expenses (-) -29.008,20 -13.765,61
Income and expenditure for the period Subtotal II + III + IV 123.193,53 186.547,23
V. Profit (loss) on ordinary activities before tax 6.569.751,32 -5.614.382,42
VII. Result for the period 6.569.751,32 -5.614.382,42
Appropriation Account 31/12/2012 (in the currency of the sub-fundm)
31/12/2011 (in the currency of the sub-fund)
I. Profit to be appropriated 16.532.271,99 9.950.232,75 Profit (loss) brought forward from the previous
financial year 9.950.232,75 15.810.215,62
Profit for the period available for appropriation 6.569.751,32 -5.614.382,42 Income on the creation of shares (income on the
cancellation of shares) 12.287,92 -245.600,45
II. (Appropriations to) Deductions from capital -16.532.271,99
III. Profit (loss) to be carried forward 9.950.232,75
2.4 COMPOSITION OF THE ASSETS AND KEY FIGURES
2.4.1 COMPOSITIONS OF THE ASSETS OF KBC EQUITY FUND SATELLITES