TAkAFUlINk FUNDS REPORT Takafulink Reports and Statements for the year ended 31 December 2016

Transcription

1 For All For Life TAkAFUlINk FUNDS REPORT 2016 Takafulink Reports and Statements for the year ended 31 December 2016

2 Contents 2 CEO s Message 5 Fund Objectives 6 Investment Review 12 Fund Performance 13 Investment Outlook 27 Statement of Assets and Liabilities 31 Statement of Changes in Net Asset Value 35 Statement of Income & Expenditure 39 Notes to the Accounts 41 Statement by Directors 42 Independent Auditors Report 15 Financial Highlights Dear Certificate Holders, We have the pleasure in presenting to you the Takafulink Funds Report 2016 of Prudential BSN Takaful Berhad. This report is also available on our website at

3 Takafulink Funds Report PruBSN Warisan Can she stand on her own without you one day? BENEFITS Ensuring family survival Nominate your own beneficiary High non-medical limit *Terms & conditions apply

4 2 Takafulink Funds Report 2016 CEO S MESSAGE 2016 marked an exciting year for us at PruBSN. With a team that has endured these challenges with tenacity and persistence, it gives me great pleasure to share the latest edition of our Takafulink Funds Report. I hope this report will be a valuable guide as you plan for your long-term financial needs and goals. The international markets were volatile through 2016 with global political development fuelling uncertainties in the Malaysia market as well. Irrespective of this volatility, Malaysia s economy grew by 4.2% in 2016 and is expected to remain on a moderate growth path at 4.5% in Correspondingly, our achievements in the industry and close insights on the economic and regulatory changes have positioned us as trusted experts in the takaful industry. We delivered New Business growth on Annual Contribution Equivalent (ACE) 1 of 4.3% against last year at RM446 million and a market share of 32.5% as at 31 December 2016.

5 Takafulink Funds Report CEO S MESSAGE We delivered New Business growth on Annual Contribution Equivalent (ACE) 1 of 4.3% against last year at RM446 million and a market share of 32.5% as at 31 December This maintained us as the Number One Family Takaful Operator in the country for six consecutive years. Since our inception, we remain focused to provide protection and savings opportunities that meet the growing needs of Malaysians today. With the evolving markets, adaptability is a competitive advantage. In 2016, we introduced an improved Vision and Mission as the beacon to guide the company through these refreshed objectives also saw various initiatives by the company which contributed more inventive solutions to the market, adding on to our impressive list of firsts in the industry. We introduced PruBSN Warisan, another innovative plan which reinforced our position as an industry leader. PruBSN Warisan is an investment-linked takaful plan that provides a high sum covered to accommodate the need of leaving a legacy behind for loved ones in the form of hibah (gift) should the unfortunate happen. As part of the launch, we provided engaging and broad activities to promote hibah takaful across a diverse mix of medias. This awareness programme has been a renowned success. Within the first 3 months of launching, approximately 11,600 people have benefited from this awareness programme by subscribing to PruBSN Warisan, with approximately RM5.2 billion worth of protection guaranteed to their nominated beneficiaries, the highest in Prudential Group history. Like our customers, we are enthused by new technologies. We created PruBSN Touch, a customer portal equipped with the e-certificate facility, to enable our customers to update personal details, print annual returns, review certificate details, view contribution payment and policy status. We also launched our e-payment platform which offers our certificate holders the flexibility to make payments online. These innovations are reflective of our efforts to harness technology in a way that can genuinely benefit our customers and aligns to the government s ongoing initiative to digitise financial transactions. 1 Annual Premium Equivalent (APE) or Annual Contribution Equivalent (ACE) is a global and widely accepted standard for measurement of new business performance of insurance and takaful companies. APE or ACE is the total amount of regular premiums from new business plus (+) 10% of the total amount of single premium on business written during the year.

6 4 Takafulink Funds Report 2016 CEO S MESSAGE Apart from creating benefits for our investors and shareholders, we strive to deliver economic and social benefits for the communities in which we operate. Through our charity investment arm PruBSN Prihatin, we initiated Project Surprise with a mission to give hope to children cancer patients nationwide by granting their wishes. We have also disbursed a substantial amount of zakat and charity funds for the communities we support to provide basic living needs, education continuity and assisting those suffering from critical illness. As an extension to our Corporate Social & Zakat Responsibility programmes, we work together with Prudential s Regional charity investment arm, Prudence Foundation, for the post-disaster relief and rebuilding missions in Bantayan, Philippines and Quang Binh, Vietnam last year. Our focused efforts and disciplined execution of our core strategies has gained us multiple industry award wins under our belt. Last year, PruBSN was awarded the Most Outstanding Takaful Company at the 13 th Kuala Lumpur Islamic Finance Forum as well as conferred 24 awards including Best Takaful Operator for Agency Family Takaful Business by the Malaysian Takaful Association. We look forward to your continued support as we elevate and take on new challenges to serve you better. I would like to express my earnest appreciation for your loyalty and continued patronage with PruBSN. My extended gratitude goes to our fully committed shareholders who have worked closely with me to ensure financial security is made accessible to all Malaysians and their families. Wishing you every success in 2017! With my very best wishes, Aman Chowla Chief Executive Officer Prudential BSN Takaful

7 Takafulink Funds Report FUND OBJECTIVES The Takafulink Dana Ekuiti Fund aims to maximise returns over medium-to-long term by investing in high quality Shariahcompliant equities listed on Bursa Malaysia. The Takafulink Dana Bon Fund aims to provide medium-to-long term accumulation of capital by investing in selected sukuk and Islamic money market instruments. The Takafulink Dana Urus Fund seeks to maximise returns over medium-to-long term by investing in Shariah-compliant equities, sukuk and Islamic money market instruments through Takafulink Dana Ekuiti and Takafulink Dana Bon, and in any other such Takafulink funds that may become available in the future. The Takafulink Dana Ekuiti Dinasti Fund aims to provide long-term capital appreciation by investing in Shariah-compliant investments with exposure to the Greater China region. There is no change in the investment objectives and strategies for all funds during the year.

8 6 Takafulink Funds Report 2016 INVESTMENT REVIEW Equity Market The start of 1Q2016 was a very volatile period for global equity markets as investors fretted over the state of the United States ( US ) economy, weak oil prices with seemingly little impact on oil production, and continued concerns over China s stock market rout. China lifted the ruling that regulators put in place in 2015 to now allow shareholders with holdings exceeding 5% and insiders to sell their stakes. China s Securities Regulatory Commission ( CSRC ) introduced the use of circuit breakers in an attempt to tame the wild gyrations of the market, but had the opposite reaction, resulting in increased selling pressure triggering the circuit breaker many times in the first week of trading, until the CSRC abandoned it four days later. This was further complicated by weakness in the US Dollar ( USD ) as expectations for the US Federal Reserve to continue their hawkish stance diminished significantly early February due to the tighter financial conditions. Given the sharply lower oil prices, the Malaysian government announced a recalibrated Budget 2016 in an effort to maintain fiscal discipline. The 4Q2015 results reporting season ended with consensus adjusting down 2015 earnings to a contraction of 2%-3%, and 2016 earnings per share ( EPS ) is now expected to grow by 5%-6% year-on-year ( yoy ), down from 7%-8% at the beginning of The Malaysian Ringgit ( RM ) strengthened from RM4.29/USD at the end of 4Q2015 to RM3.90/ USD by end of 1Q2016. Foreign institutional investors were net buyers of Malaysian equities for the 1Q2016 of RM5.7billion, after six consecutive quarters of net foreign outflow. Crude oil prices also rebounded from the low of USD27.10 per barrel in January 2016, to end the quarter at USD38.34 per barrel as production from shale oil production in the US started showing signs of declining. Markets consolidated early in 2Q2016 amidst steadily higher crude oil prices and volatility in currencies against the USD. After months of uncertainty regarding the possibility of a BREXIT, US interest rate hike and slower economic data from China, global markets corrected sharply towards the end of the 2Q2016 as the unexpected happened: on the 23 June 2016, United Kingdom ( UK ) voted to leave the European Union. Panic selling ensued but markets quickly rebounded thereafter as UK s Prime Minister stepped down following the result, and investors digest the mechanics of how UK will leave the European Union, and how it will be a long drawn out affair. The demand for safe haven currencies took hold, and the Japanese Yen strengthened below Yen100/USD intraday near the end of June (strengthening about 16% year to date), whilst the British Pound depreciated by 10% year to date. Domestically, Malaysia trended down during the 2Q2016 despite the stronger crude oil prices which bounced back from USD40 per barrel to USD50 per barrel during the quarter. Investor sentiment was weak following the concerns over the technical default on the 1Malaysia Development Berhad ( 1MDB ) bond which missed a payment given the dispute between the issuer (1MDB) and the guarantor (International Petroleum Investment Co), which led to speculation over potential cross defaults and putting sovereign ratings at risk. Even the announcement of Datuk Muhammad Ibrahim, who was the Bank Negara Malaysia ( BNM ) deputy governor, as the new governor of BNM failed to excite the market. 1Q2016 results season was once again a disappointment, and consensus has cut 2016 earnings by 4.5%, and now expects 2016 earnings to still grow by 1.3%. However, despite the weak earnings growth outlook, the Malaysian economy remained fairly resilient in light of the external volatilities such as BREXIT.

9 Takafulink Funds Report Investment Review Equity Market (continued) In 3Q2016 global markets enjoyed a decent rally on the back of expected continued global efforts to ensure accommodative monetary policy is still on the agenda. European markets stabilised somewhat as there was a quick resolution to the UK Prime Minister s position that was vacated by David Cameron due to the BREXIT outcome. Towards the end of the 3Q2016, the launch of Apple s iphone 7 was well received with stock of the new model all sold out within a couple of days post launch. Samsung Electronics were badly affected by the recall of their latest Galaxy Note 7 due to the incidences of exploding batteries. The US Presidential debate was also in focus as the race between the two candidates remained tight five weeks before the elections. Crude oil prices rebounded as Organisation of the Petroleum Exporting Countries ( OPEC ) s meeting in Algiers saw an agreement of sorts to freeze production. Malaysian equities corrected early 3Q2016 on the back of negative news flow from the announcement by the US Department of Justice filing a civil suit to seize assets tied to 1MDB, under the Kleptocracy Asset Recovery Initiative. Fitch Ratings downgraded Petronas Long Term Foreign and Local Currency Issuer Default Ratings ( IDRs ) to A- from A, but affirmed their short term foreign currency IDR at F1. The outlook on the Long Term IDRs is Stable. The 2Q2016 results season delivered yet another round of lower than expected earnings, resulting in consensus downgrade of Malaysian earnings growth for 2016 to approximately -2% yoy, the third year of negative growth. The 3Q2016 ended with more focus on the upcoming 2017 Budget, and concerns over whether Malaysia s fiscal deficit target of 3.1% for 2016 would be met. 4Q2016 was a volatile one for global markets. UK s parliament debated on their exit from the European Union, as the Sterling Pound fell to a low against the USD and Euro. In November, the surprise win by Mr Trump in the US Presidential Elections gave rise to global uncertainties, which saw the Asia Pacific regional markets correct sharply, in anticipation potential negative trade policies to be enacted. The US equity market, after a brief but sharp decline post elections, rallied to all-time highs as investors are hopeful that talks of a corporate tax cut and increased fiscal spending will stimulate the economy. In December, the US Federal Reserve raised the target range for the Federal Funds Rate at % as expected, and the Federal Open Market Committee ( FOMC ) gave indications of more interest rate hikes to come. Oil prices rallied as non-opec members agreed to reduce output, on top of the output cut agreed by OPEC members. Malaysian equities started 4Q2016 off well with concerns over meeting fiscal deficit targets allayed somewhat leading up to the Budget 2017 announcement. Foreign investors concerns were heightened when BNM reiterated that onshore banks are not to facilitate offshore banks with non-deliverable forwards ( NDFs ) which they attributed speculation on the Ringgit and the highly volatile movements in the exchange rate of late. The MYR continued its downwards trend ending the 4Q 2016 at RM4.4862/USD, prompting BNM to come out with measures early in the month to restrict exporters from apparent hoarding of USD.

10 8 Takafulink Funds Report 2016 Investment Review Equity Market (continued) The FBM Emas Shariah (FBMS) Index closed the year under review at 12, points, down 6.142%. The broader FBM Emas (FBMEMAS) Index closed the period under review lower by 2.77%. The MSCI Asia Pacific ex-japan Index rose by 3.74% in USD terms 1. Sukuk Market Review Bank Negara Malaysia ( BNM ) maintained the Overnight Policy Rate ( OPR ) at 3.25% throughout the first half of 2016 as BNM believes that the monetary policy stance remained accommodative and supportive of economic activity. However, BNM noted the downside risks in the global economic and financial environment and was closely monitoring and assessing their implications on domestic price stability and growth to ensure that the stance was consistent with the sustainable growth of the Malaysian economy. Separately, BNM reduced the Statutory Reserve Requirement ( SRR ) from 4.00% to 3.50% effective 1 February to ensure sufficient liquidity in the financial system. At the Monetary Policy Committee ( MPC ) meeting on 13 July 2016, BNM unexpectedly reduced the OPR by 25 basis points ( bps ) to 3.00% from 3.25%. BNM s move to reduce the OPR was seen as a pre-emptive move by the central bank as BNM expects growth momentum in the major economies to moderate in the second half of the year coupled with increasing downside risks in light of possible repercussions from the European Union referendum in the UK. Following the rate cut in July, BNM kept the OPR at 3.00% in the subsequent MPC meetings for BNM anticipates the domestic economy to remain robust and to grow between 4%-4.5% for 2016 but global uncertainties could weigh on the growth. Nevertheless, BNM expects domestic demand to be the main driver of growth while private consumption is expected to be supported by stable wage and employment growth. Overall investment is expected to be supported by the on-going implementation of infrastructure projects and capital spending in the manufacturing and services sectors. Exports are projected to remain weak following more subdued demand from Malaysia s key trading partners. Headline inflation eased from 2.7% year-on-year ( yoy ) in December 2015 to 1.8% yoy in November The drop was mainly driven by a fall in transportation costs (-1.5% yoy), communications (-2.7% yoy) and clothing inflation (-0.5% yoy). On the other hand, food and non-alcoholic beverages inflation was relatively stable at 3.9% yoy in December 2015 and 3.8% yoy in November For 2017, headline inflation is expected to increase due to the removal of subsidies coupled with higher energy prices as oil price has rebounded up from around USD 41 per barrel in January to around USD53 per barrel as at end December Source: Bloomberg: World indices

11 Takafulink Funds Report Investment Review Sukuk Market Review (continued) In his budget speech in October, the Prime Minister unveiled 2017 national budget with the theme Accelerating Growth, Ensuring Fiscal Prudence, Enhancing Well-being of the Rakyat. Overall, fiscal consolidation remains on track as the Government plans to achieve a budget deficit at RM40.3billion or 3.0% of Gross Domestic Product ( GDP ) in The Government expects revenue in 2016 to ease lower to RM212.6billion (2015: RM219.1billion) mainly due to lower collection of petroleum related revenue following lower crude oil prices. However, this impact is expected to be cushioned by improved Government Service Tax ( GST ) collection. Furthermore, the Government expects revenue collection to improve by 3% in 2017 on the back of larger tax revenue from corporate income tax collection. Separately, the Government expects the Malaysian economy to gain some traction to grow between % in 2017 as the Government expects that growth will remain private sector-driven, supported by quicker expansions in private consumption and private investment with added support from public spending and continued recovery in exports. The surprise win by the Republican presidential nominee Donald Trump in the recent United States Presidential Election in November 2016 spurred a broad flight to safety around the globe. Investors were left unsettled over the future of the American and global economy based on the economic policies that were advocated by Trump throughout his presidential campaign. Trump s future policies indicate higher fiscal spending and tax cuts which may lead to more debt supply and higher yields. Separately, the market-implied chance of a US Federal Reserve ( Fed ) hike increased after Trump s triumph as investors now expects the Fed to continue its monetary tightening path in December 2016 and 2017 onwards. In December 2016, the Fed raised its key interest rates by 25bps to between 0.50%-0.75%. The Fed s move to raise interest rate was widely expected by the market as the Fed has been signalling for a rate hike for nearly a year since the Fed last raised interest rate in December 2015 from a record low near zero set during the 2008 financial crisis. The Federal Open Market Committee ( FOMC ) s recent action signalled that the Fed believe that the US economy has improved over the past year and expect that the US economic activity will continue expand at a moderate pace with improving labour market conditions. For the period under review, the 3-year, 5-year, 10-year and 15-year sovereign sukuk yields changed by +31bps, -4bps, -15bps and +3bps to 3.66%, 3.80%, 4.37% and 4.65% respectively. In 1Q2016, sovereign sukuk yields drifted lower after BNM reduced the SRR from 4.00% to 3.50% effective 1 February to ensure sufficient liquidity in the financial system. Furthermore, yields continued to trend downwards after a dovish statement by the FOMC which indicated a very gradual path of rate hike in Sovereign sukuk yields continued to fall across all tenors at the end of the second and third quarter of 2017, following United Kingdom s Referendum on 23 June 2016 to withdraw from European Union and after BNM unexpectedly cut the OPR by 0.25% to 3.00% in July 2016 s MPC meeting. However, sovereign sukuk yields spiked higher in November after the Republican presidential nominee Donald Trump won the recent US Presidential Election. Investors were left unsettled over the future of the American and global economy based on the economic policies that were advocated by Trump throughout his presidential campaign. Furthermore, yields were traded higher on the expectation of higher Fed rate hike as the Fed are now forecasting three rate increases in 2017 instead of two rate hikes as previously projected.

12 10 Takafulink Funds Report 2016 Investment Review Sukuk Market Review (continued) Corporate sukuk yields generally moved in tandem with sovereign sukuk yields, albeit at a lag. Activities in the corporate sukuk market were supported by ample liquidity and a stable credit environment. On the supply front, total new Malaysian Ringgit ( MYR ) Corporate issuances in 2016 were relatively flat around RM71bilion of which approximately 25% was conventional and 75% was Islamic. Major primary issuances were from the government guaranteed, power, toll roads and banking sectors. Major issuances include RM9billion from Danainfra, RM5.5billion from Sarawak Hydro, RM4.2billion from Cagamas and RM3.6billion from Lebuhraya Duke Fasa-3. Asia-Pacific ex-japan Asian equity markets ended 2016 slightly higher despite several unexpected global events throughout the year. On a year-onyear basis, Thailand s Stock Exchange of Thailand ( SET ), Korea s Korean Composite Stock Price Indices ( KOSPI ) and Hong Kong s Hang Seng were notable gainers while Malaysia, Vietnam, and Philippines ended the year in the red. The negative sentiment from 2015 carried over into After the Chinese circuit breaker spooked markets on the first trading day, investors, fretted over a weakening Chinese economy and currency, collapsing oil price and disappointing US earnings season. There was a minute amount of relief as global equity markets rallied on the final trading day of the January 2016 when the Bank of Japan surprised markets with negative interest rates. As the year progressed, Asia equities were lifted by the People s Bank of China s ( PBoC ) decision to cut reserve requirements in March 2016 and a global rush towards resource stocks. Association of Southeast Asia Nations ( ASEAN ), however, bucked the uptrend as a weaker Chinese economy and domestic issues weighed on sentiment. The unexpected UK referendum outcome in June 2016 triggered a spike in volatility but markets rebounded quickly. As risk abated, July 2016 marked record flows into Emerging Market ( EM ) assets and EM Asia equities rose accordingly. But as the year drew to a close, Chinese equities lagged following the sharp bond market decline after authorities announced more stringent monetary policies. Indian equities also had a volatile month as the impact of demonetisation continued to unnerve investors. Bucking the downward trend, ASEAN equities generally rose, led by Indonesia as Fitch revised its rating outlook to positive. All in, sentiment towards the Asian equity markets were very much driven by US news. The protectionist rhetoric from the new president, fears of higher interest rates, and a stronger USD had prompted investors to leave emerging market equities. The outflows were exacerbated by the Fed s December meeting, which raised the US interest rate by twenty-five basis points, and the Fed signalling that interest rates might be raised three more times in 2017.

13 Takafulink Funds Report Investment Review Global Market 2016 started on a weak note as fears about a Chinese economic slowdown and a depreciating RenMinBi ( RMB ) sparked a global sell-off. Oil prices also plunged to a low of $27.10 a barrel on the back of excess supply and low demand. This promoted the sell down of energy related sectors and raised the likelihood of high yield bond defaults. In a surprise move, the Bank of Japan introduced negative interest rates to counter a global slowdown and consequently rates of developed countries dived as investors of Japanese government bonds bought into relatively higher yielding sovereign debt. In a similar vein, the European Central Bank extended quantitative easing in Europe and further reduced interest rates. The United States ( US ) Federal Reserve also held rates constant in March, signalling global factors played a role in its decision to pause. At the halfway mark, the unexpected result of the United Kingdom ( UK ) referendum took centre stage and caused an increase in risk aversion. Global equities sold off and the Sterling took a beating. On the other hand, gold prices rose and government bond yields fell lower as investors piled into safe haven assets. The unexpected Trump victory dominated headlines as the year drew to a close. Developed market equities surged while bonds sold off as investors bet on Trump s possible reflationary policies. US equities surged into record territory while bond yields rose very quickly as investors rotated into risk-on assets. Subsequently the US Federal Reserve finally raised rates and indicated a more aggressive pace of tightening in As a result of the Trump effect and the steeper pace of rising rates in the US, the US Dollar surged to multi-year highs and decimated Emerging Market assets (which had a stellar year until the US elections), with the exception of Brazil and Russia; both these markets thrived on recovering oil prices supported by a historic agreement to curb production between The Organization of the Petroleum Exporting Country ( OPEC ) and Non-OPEC.

14 12 Takafulink Funds Report 2016 FUND PERFORMANCE Takafulink Dana Ekuiti As at 31 December 2016, the Fund s Net Asset Value per unit depreciated by -3.88% to RM as compared to RM as at 31 December Since inception (1 December 2006), the Fund registered a positive return of %. Takafulink Dana Bon As at 31 December 2016, the Fund s Net Asset Value per unit increased to RM from RM as at 31 December 2015, recording a return of 4.87% for the period under review. Since inception (1 December 2006), the Fund registered a positive return of 46.85%. Takafulink Dana Urus As at 31 December 2016, the Net Asset Value per unit of the Takafulink Dana Urus was RM compared to RM as at 31 December 2015, recording a negative return of 2.08% for the period under review. Since inception (1 December 2006), the Fund registered a positive return of 95.11%. Takafulink Dana Ekuiti Dinasti As at 31 December 2016, the Fund s Net Asset Value per unit appreciated by 9.49% to RM as compared to RM as at 31 December Since inception (5 April 2010), the Fund registered a positive return of 58.86%.

15 Takafulink Funds Report Investment Outlook Equity 2017 will likely be another year of volatility is slated to witness many elections and some of the key ones to monitor include: Hong Kong s Chief Executive Election, France s Presidential Election, Iran s Presidential Election, and Germany s Election. Malaysia may also opt for an early general election as well, with the deadline being end April/early May UK may still invoke Article 50 in March 2017, and potential changes in ruling political parties in coming European elections will add uncertainty to the mix. Malaysia s blossoming relationship with China will likely have a bigger influence on the construction and property sector in the months to come although the ultimate multiplier effect on the Malaysian economy has yet to be determined. The finer details as to which portions will be farmed out to local contractors have yet to be unveiled. Consumption should hold up, going into 2017 with higher BR1M payments to more recipients. The higher crude oil prices will help provide some relief to the government s fiscal balance, as well as improved agriculture output as El Nino should be behind us. However with consumer the resilient driver of growth, a sharply weaker ringgit will have a negative impact on disposable incomes as much of our food and beverage items are imported, and dampen consumer confidence in general. We remain relatively cautious, looking for opportunity to accumulate fundamentally sound stocks on weakness. Sukuk It will be a new beginning for the US as Donald Trump was sworn in as the 45th President of the United States on 20 January Donald Trump will officially take over from President Barack Obama and his inauguration may mark the start of a new wave of uncertainty across the global economy. His new policies may result a higher fiscal spending and tax cuts which may lead to more debt supply and higher US treasury yields in the US. Furthermore, there are doubts on the fate of current trade treaties and partnership that have been signed with the US. However, these new policies are yet to be finalised and investors will closely monitor any new official announcement that he may make once he is sworn in as the new US president.

16 14 Takafulink Funds Report 2016 Investment Outlook Sukuk (continued) On 14 December 2016, the Fed set the new target range for the federal funds rate at 0.5% to 0.75%, up from 0% to 0.25%. The hike was the second change since the rate was lowered to near zero in December The Fed also released an updated forecast as the Fed is now forecasting three rate increases in 2017 instead of two rate hikes as previously projected according to the new dot plot of rate projections. This new path implies that the Fed is now ready to raise interest rates as the Fed may have taken into consideration the effects of the incoming Trump administration s promises of tax cuts, spending and deregulation. However, the Fed would continue to monitor the economic expansion and labour market indicators before hiking its rates. Going forward, BNM will be focusing on providing support for the sustainability of economic growth in the months ahead. BNM expects inflation to remain relatively stable in 2017 given the environment of low global energy and commodity prices, and generally subdued global inflation. We believe that BNM would leave the OPR rate unchanged, and that any possibility of a rate change will be data-dependent on external uncertainties and domestic growth. We expect the fixed income market to be volatile in 2017 given the rising uncertainty in the global economic condition and political backdrop. MYR performance, monetary policy tightening by the Fed, China s growth, and political developments in Europe will be the key risk factors in 2017 which may impact to the domestic sovereign sukuk market. On the domestic corporate sukuk segment, we are still cautious of rising risks of rating downgrades and defaults in the credit market amidst the protracted slow environment. On the supply side, we believe that corporates will remain cautious towards expansion or capex spending in 2017 given uncertainties surrounding global and local economic outlook and may hold their plans to tap into the corporate sukuk market. Asia-Pacific ex-japan Asian equities remain very cheap relative to their long term averages and relative to developed markets of the West. Investing at these valuations has historically been a very attractive entry point. We are now seeing improving economic growth supported by a pick up in earnings delivery across Asia which has been driving improving sentiment for the region s shares. Global Market Heading into 2017, there are signs of a broadening economic recovery across regions but some key risks include a disorderly unwind of high private sector leverage in China, a more hawkish than expected shift of US monetary policy and rising US-China tensions.

17 Takafulink Funds Report FINANCIAL HIGHLIGHTS Comparative Performance Table for financial year ended 31 December 2016 Takafulink Dana Ekuiti Description % % % % % Equity Automotive Banking & Finance Building Materials Conglomerates Construction Consumer Products Health Care Takaful Manufacturing Media Motor Oil & Gas Plantation Power Property Services Technology Telecommunications Transportation Cash and Islamic Deposits Other Assets Total Liabilities (2.26) (1.39) (1.22) (2.91) (2.98) Total

18 16 Takafulink Funds Report 2016 Financial Highlights Comparative Performance Table for financial year ended 31 December 2016 Takafulink Dana Ekuiti Description % % % % % Total Net Asset Value (RM) 782,472, ,457, ,891, ,277, ,674,835 Units in Circulation 373,553, ,420, ,098, ,923, ,298,428 NAV Per Unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Total Return (+) - Capital Growth (3.88%) 5.11% 1.23% 15.11% 16.61% Average Annual Return Fund (+) Period One year (3.88%) 5.11% 1.23% 15.11% 16.61% Three years 0.75% 6.99% 10.76% 13.35% 14.19% Five years 6.54% 9.15% 11.65% 18.47% 5.55% Average Annual Return Benchmark: FTSE-Bursa Malaysia Emas Shariah Index (FBMSHA) Period One year (6.14%) 2.35% (4.17%) 13.29% 11.85% Three years (2.72%) 3.57% 6.68% 9.07% 10.63% Five years 3.13% 4.94% 8.01% 17.01% 1.81%

19 Takafulink Funds Report Financial Highlights Takafulink Dana Ekuiti Fund Performance Takafulink Dana Ekuiti Vs. FTSE Bursa Malaysia Emas Shariah Index (FBMSHA) % % % Change Since Inception (20.00) (20.00) (40.00) Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Dec-16 Date (40.00) TDE FBMSHA + The Fund returns are calculated based on five decimal place. The unit prices of the Funds may go down as well as up and the past performance figures shown are not indicative of future performance.

20 18 Takafulink Funds Report 2016 Financial Highlights Comparative Performance Table for financial year ended 31 December 2016 Takafulink Dana Bon Description % % % % % Sukuk: - Sukuk Government Quasi Government Cash and Islamic Deposits Other Assets Total Liabilities (0.41) (0.36) (0.37) (0.37) (0.49) Total Total Net Asset Value (RM) 68,157,730 59,926,292 53,317,726 39,738,109 38,783,817 Units in Circulation 46,396,573 42,779,802 39,403,967 30,454,959 29,789,395 NAV Per Unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Total Return (+) - Capital Growth 4.87% 3.53% 3.70% 0.22% 5.70%

21 Takafulink Funds Report Financial Highlights Comparative Performance Table for financial year ended 31 December 2016 Takafulink Dana Bon Description % % % % % Average Annual Return Fund (+) Period One year 4.87% 3.53% 3.70% 0.22% 5.70% Three years 4.03% 2.76% 3.18% 3.58% 5.35% Five years 3.59% 3.59% 3.98% 4.24% 4.57% Average Annual Return Benchmark: MBB 1 month Tier 1 Islamic Deposit-i rate Period One year 3.30% 3.09% 2.89% 2.75% 2.84% Three years 3.09% 2.91% 2.83% 2.84% 2.76% Five years 2.97% 2.90% 2.78% 2.63% 2.66%

22 20 Takafulink Funds Report 2016 Financial Highlights Takafulink Dana Bon Fund Performance Takafulink Dana Bon Vs. 1 Month Maybank Tier 1 Islamic Deposit Rate % Change Since Inception % % (5.00) (10.00) Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Feb-12 Date Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Dec (5.00) (10.00) TDB MBB 1 Month Tier 1 Islamic Deposit Rate + The Fund returns are calculated based on five decimal place. The unit prices of the Funds may go down as well as up and the past performance figures shown are not indicative of future performance.

23 Takafulink Funds Report Financial Highlights Comparative Performance Table for financial year ended 31 December 2016 Takafulink Dana Urus Description % % % % % Investment in - Takafulink Dana Ekuiti Fund Takafulink Dana Bon Fund Other Assets Total Liabilities (0.01) Total Total Net Asset Value (RM) 215,046, ,840, ,801, ,408,086 90,908,575 Units in Circulation 110,149,953 98,226,016 87,659,334 68,180,347 54,410,831 NAV Per Unit(RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Total Return (+) - Capital Growth (2.08%) 4.78% 1.82% 11.85% 13.90%

24 22 Takafulink Funds Report 2016 Financial Highlights Comparative Performance Table for financial year ended 31 December 2016 Takafulink Dana Urus Description % % % % % Average Annual Return Fund (+) Period One year (2.08%) 4.78% 1.82% 11.85% 13.90% Three years 1.47% 6.07% 9.06% 11.05% 12.21% Five years 5.88% 7.88% 9.98% 15.34% 5.27% Average Annual Return Benchmark: 80% FBMSHA + 20% 1 Month Maybank Tier 1 Islamic Deposit rate Period One year (4.28%) 2.61% (2.76%) 11.18% 10.05% Three years (1.52%) 3.52% 5.96% 7.76% 8.98% Five years 3.16% 4.54% 6.95% 14.03% 2.12%

25 Takafulink Funds Report Financial Highlights Takafulink Dana Urus Fund Performance Takafulink Dana Urus Vs. 80% FBMSHA + 20% 1 Month Maybank Tier 1 Islamic Deposit Rate % % % Change Since Inception (20.00) Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Dec-16 Date (20.00) TDU 80%FBMSHA & 20%1 MTH MBB T1 Islamic Deposit Rate + The Fund returns are calculated based on five decimal place. The unit prices of the Funds may go down as well as up and the past performance figures shown are not indicative of future performance.

26 24 Takafulink Funds Report 2016 Comparative Performance Table for financial year ended 31 December 2016 Takafulink Dana Ekuiti Dinasti Description % % % % % Investment in - Eastspring Investments Dinasti Equity Fund Cash and Islamic Deposits Other Assets Total Liabilities (1.48) (1.31) (0.91) (2.97) (1.78) Total Total Net Asset Value (RM) 31,872,838 24,417,988 17,713,152 14,001,888 8,838,416 Units in Circulation 20,062,820 16,829,444 14,470,661 11,866,743 8,242,370 NAV Per Unit (RM) Highest NAV per unit (RM) Lowest NAV per unit (RM) Total Return (+) - Capital Growth 9.49% 18.53% 3.75% 10.03% 10.55%

27 Takafulink Funds Report Financial Highlights Comparative Performance Table for financial year ended 31 December 2016 Takafulink Dana Ekuiti Dinasti Description % % % % % Average Annual Return Fund (+) Period One year 9.49% 18.53% 3.75% 10.03% 10.55% Three years 10.42% 10.60% 8.06% 2.55% n/a Five years 10.37% 5.81% n/a n/a n/a Average Annual Return Benchmark: Dow Jones Islamic Market Greater China Index Period One year 8.51% 16.97% 9.91% 18.04% 6.75% Three years 11.74% 14.92% 12.83% 2.96% n/a Five years 12.76% 7.01% n/a n/a n/a

28 26 Takafulink Funds Report 2016 Financial Highlights Takafulink Dana Ekuiti Dinasti Fund Performance Takafulink Dana Ekuiti Dinasti Vs. Dow Jones Islamic Market Greater China Index % % % Change Since Inception (10.00) Apr-10 Sep-10 Jan-11 Jun-11 Oct-11 Feb-12 Jul-12 Nov-12 Apr-13 Aug-13 Date Dec-13 May-14 Sep-14 Feb-15 Jun-15 Oct-15 Mar-16 Jun-16 Dec-16 (10.00) TDED Dow Jones Islamic Market Greater China Index + The Fund returns are calculated based on five decimal place. The unit prices of the Funds may go down as well as up and the past performance figures shown are not indicative of future performance.

29 Takafulink Funds Report STATEMENT OF ASSETS AND LIABILITIES as at 31 December 2016 Takafulink Dana Ekuiti RM % RM % Investments Shariah-compliant Securities 746,717, ,393, Cash and Islamic Deposits 51,175, ,136, Cash at bank 25, , Islamic Deposits 51,150, ,120, Tax Assets 1, , Other Assets 2,269, ,335, Dividend Receivable 2,250, ,309, Accrued Profit 18, , Total Assets 800,163, ,866, Provision for Deferred Tax (3,697,069) (0.47) (7,145,809) (1.06) Provision for Taxation (280,648) (0.04) (138,283) (0.02) Other Liabilities (13,713,770) (1.75) (2,125,400) (0.31) Due to Stockbroking Companies (12,653,674) (1.62) (1,213,297) (0.18) Other Liabilities (1,060,096) (0.13) (912,103) (0.13) Total Liabilities (17,691,487) (2.26) (9,409,492) (1.39) Net Asset Value of the Fund 782,472, ,457, Participants Fund Capital 636,346, ,453, Generated Income Carried Forward 146,125, ,003, Total Participants Fund 782,472, ,457, Net Asset Value Per Unit (RM) NUMBER OF UNITS 373,553, ,420,558

30 28 Takafulink Funds Report 2016 Statement of Assets and Liabilities as at 31 December 2016 Takafulink Dana Bon RM % RM % Investments Sukuk 67,274, ,165, Cash and Islamic Deposits 409, ,477, Cash at bank 29, , Islamic Deposits 380, ,460, Other Assets 758, , Total Assets 68,443, ,142, Provision for Taxation (239,434) (0.35) (220,815) (0.37) Provision for Deferred Tax (16,781) (0.02) 29, Other Liabilities (29,170) (0.04) (25,148) (0.04) Total Liabilities (285,385) (0.41) (216,368) (0.36) Net Asset Value of the Fund 68,157, ,926, Participants Fund Capital 55,190, ,945, Generated Income Carried Forward 12,967, ,980, Total Participants Fund 68,157, ,926, Net Asset Value Per Unit (RM) NUMBER OF UNITS 46,396,573 42,779,802

31 Takafulink Funds Report Statement of Assets and Liabilities as at 31 December 2016 Takafulink Dana Urus RM % RM % Investments in - Takafulink Dana Ekuiti Fund 172,144, ,928, Takafulink Dana Bon Fund 42,902, ,914, Total Assets 215,046, ,843, Other Liabilities (394) (0.00) (2,372) (0.00) Total Liabilities (394) (0.00) (2,372) (0.00) Net Asset Value of the Fund 215,046, ,840, Participants Fund Capital 175,452, ,996, Generated Income Carried Forward 39,594, ,844, Total Participants Fund 215,046, ,840, Net Asset Value Per Unit (RM) NUMBER OF UNITS 110,149,953 98,226,016

32 30 Takafulink Funds Report 2016 Statement of Assets and Liabilities as at 31 December 2016 Takafulink Dana Ekuiti Dinasti RM % RM % Investments in - Eastspring Investments Dinasti Equity Fund 32,164, ,604, Cash At Bank 62, , Other Assets 117, , Total Assets 32,343, ,738, Provision for Taxation (77,966) (0.24) - - Provision for Deferred Tax (306,273) (0.96) (231,094) (0.95) Other Liabilities (86,595) (0.27) (89,064) (0.36) Total Liabilities (470,834) (1.48) (320,158) (1.31) Net Asset Value of the Fund 31,872, ,417, Participants Fund Capital 23,343, ,675, Generated Income Carried Forward 8,529, ,742, Total Participants Fund 31,872, ,417, Net Asset Value Per Unit (RM) NUMBER OF UNITS 20,062,820 16,829,444

33 Takafulink Funds Report STATEMENT OF CHANGES IN NET ASSET VALUE for the financial year ended 31 December 2016 Takafulink Dana Ekuiti RM RM Net Asset Value at beginning of year 676,457, ,891,215 Amounts received from units created 746,867, ,038,418 Amounts paid for units cancelled (612,974,958) (447,437,097) Excess of (Outgo) over Income/Excess of Income over Outgo (27,878,244) 30,964,905 Value of fund at end of year 782,472, ,457,441

34 32 Takafulink Funds Report 2016 Statement of Changes in Net Asset Value for the financial year ended 31 December 2016 Takafulink Dana Bon RM RM Net Asset Value at beginning of year 59,926,292 53,317,726 Amounts received from units created 17,005,594 12,907,879 Amounts paid for units cancelled (11,761,171) (8,289,898) Excess of Income over Outgo 2,987,015 1,990,585 Value of fund at end of year 68,157,730 59,926,292

35 Takafulink Funds Report Statement of Changes in Net Asset Value for the financial year ended 31 December 2016 Takafulink Dana Urus RM RM Net Asset Value at beginning of year 195,840, ,801,352 Amounts received from units created 146,166, ,599,164 Amounts paid for units cancelled (122,711,224) (89,065,507) Excess of (Outgo) over Income/Excess of Income over Outgo (4,249,992) 8,505,714 Value of fund at end of year 215,046, ,840,723

36 34 Takafulink Funds Report 2016 Statement of Changes in Net Asset Value for the financial year ended 31 December 2016 Takafulink Dana Ekuiti Dinasti RM RM Net Asset Value at beginning of year 24,417,988 17,713,152 Amounts received from units created 25,152,171 19,383,410 Amounts paid for units cancelled (20,483,878) (16,080,362) Excess of Income over Outgo 2,786,557 3,401,788 Value of fund at end of year 31,872,838 24,417,988

37 Takafulink Funds Report STATEMENT OF INCOME & EXPENDITURE for the financial year ended 31 December 2016 Takafulink Dana Ekuiti RM RM Net Shariah-compliant Investment Income 20,032,005 18,762,657 Profit Income 1,272, ,536 Dividend income 18,759,484 17,911,121 Profits on Disposal of Shariah-compliant Securities 6,685,426 7,644,621 Unrealised Capital Gain - 25,020,502 Total Income 26,717,431 51,427,780 Investment Management Fees (10,620,403) (9,163,509) Loss on Disposal of Shariah-compliant Securities (4,390,164) (6,767,620) Unrealised Capital Loss (42,706,748) - Provision for taxation 3,147,168 (4,507,139) Other Outgo (25,528) (24,607) Bank Charges (618) (687) Custodian Charges (23,675) (23,018) Good & Services Tax Charges (1,235) (902) Total Outgo (54,595,675) (20,462,875) Excess of (Outgo) over Income/Excess of Income over Outgo (27,878,244) 30,964,905 Generated Income Brought Forward 174,003, ,038,673 Amount Available for Distribution - - Generated Income carried forward 146,125, ,003,578

38 36 Takafulink Funds Report 2016 Statement of Income & Expenditure for the financial year ended 31 December 2016 Takafulink Dana Bon RM RM Net Shariah-compliant Investment Income 3,141,173 2,796,253 Profits on Disposal of Shariah-compliant Securities 3,824 - Unrealised Capital Gain 579,699 - Total Income 3,724,696 2,796,253 Investment Management Fees (322,236) (289,837) Loss on Disposal of Shariah-compliant Securities (145,053) - Loss on redemption (9,254) (38,290) Unrealised Capital Loss - (301,524) Provision for taxation (257,733) (172,766) Other Outgo (3,405) (3,251) Total Outgo (737,681) (805,668) Excess of Income over Outgo 2,987,015 1,990,585 Generated Income Brought Forward 9,980,429 7,989,844 Amount Available for Distribution - - Generated Income carried forward 12,967,444 9,980,429

39 Takafulink Funds Report Statement of Income & Expenditure for the financial year ended 31 December 2016 Takafulink Dana Urus RM RM Net Shariah-compliant Investment Income 2,615,783 2,317,132 Profits on Disposal 4,509,295 6,707,798 Other Income 10,260 - Unrealised Capital Gain - 1,837,277 Total Income 7,135,338 10,862,207 Investment Management Fees (2,633,063) (2,356,493) Unrealised Capital Loss (8,752,267) - Total Outgo (11,385,330) (2,356,493) Excess of (Outgo) over Income/Excess of Income over Outgo (4,249,992) 8,505,714 Generated Income Brought Forward 43,844,180 35,338,466 Amount Available for Distribution - - Generated Income Carried Forward 39,594,188 43,844,180

40 38 Takafulink Funds Report 2016 Statement of Income & Expenditure for the financial year ended 31 December 2016 Takafulink Dana Ekuiti Dinasti RM RM Net Shariah-compliant Investment Income 482, ,735 Profit On Disposal - - Unrealised Capital Gain 1,879,465 3,502,137 Other Income 974,575 - Total Income 3,336,808 3,901,872 Investment Management Fees (396,827) (327,762) Provision for taxation (153,150) (172,089) Other Outgo (274) (233) Total Outgo (550,251) (500,084) Excess of Income over Outgo 2,786,557 3,401,788 Generated Income Brought Forward 5,742,601 2,340,813 Amount Available for Distribution - - Generated Income Carried Forward 8,529,158 5,742,601