GROUP MANAGING DIRECTOR S STATEMENT 4 FUND PROFILE 6 FUND PERFORMANCE REVIEW 8 APPENDIX: PERFORMANCE REVIEW OF INDIVIDUAL ASSET CLASS 13

Transcription

1

2 CONTENTS GROUP MANAGING DIRECTOR S STATEMENT 4 FUND PROFILE 6 FUND PERFORMANCE REVIEW 8 APPENDIX: PERFORMANCE REVIEW OF INDIVIDUAL ASSET CLASS EUROPEAN SOVEREIGN FIXED INCOME INDEX PRECIOUS METAL INDEX COPPER SPOT ASIAN BLUE CHIP EQUITY INDEX JAPANESE REITS INDEX 21 SOFT COMMISSION RECEIVED BY THE MANAGER 23 STATEMENT OF DIRECTORS 24 REPORT OF AUDITORS 25 STATEMENTS OF ASSETS AND LIABILITIES AS AT 19 JUNE STATEMENTS OF INCOME AND EXPENDITURE FOR FINANCIAL YEAR ENDED 19 JUNE STATEMENTS OF CHANGES IN NET ASSET VALUE FOR FINANCIAL YEAR ENDED 19 JUNE STATEMENTS OF CASH FLOWS FOR FINANCIAL YEAR ENDED 19 JUNE NOTES TO FINANCIAL STATEMENTS 30 COMPARATIVE PERFORMANCE TABLE 32 Page 2

3 WE CONTINUE TO PROTECT YOU AND YOUR INVESTMENT Takaful myal-afdhal plan is a 5-year closed-ended investment-linked plan that allows participants to invest in a Shariahcompliant structured investment product. With its principal-protected feature, participants will enjoy coverage throughout the term while profiting from investment returns in the form of Annual Profits* from their lump-sum Single Contribution. The Shariah-compliant structured investment portfolio is provided by Citibank Berhad ( Citibank ) which has a credit rating of AAA/P1 financial institutional ratings, with a stable outlook by RAM Holdings Berhad ( RAM ) as at 16 th December * Subject to the actual performance of the investment. The returns on the structured product investment will be based on the performance of the Reference Assets whilst the principal will only be protected if investment is held to maturity. DISCLAIMER: This report is for information purposes only. The opinion contained in this report is based on information obtained or derived from sources that we believe are reliable. Syarikat Takaful Malaysia Berhad makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. Note: Sources of information: Reuters, Bloomberg, and Other Agencies Page 3

4 GROUP MANAGING DIRECTOR S STATEMENT In the Name of Allah, the Most Compassionate, the Most Merciful Alhamdulillah, by the grace of Allah, we are pleased to present the Annual Report of Takaful myal-afdhal for its third financial year ended 19 June After exiting from the sharpest post-war economic contraction in 2009, the global recovery continued robustly, albeit at an uneven pace between advanced and emerging economies during the second half of 2010 and into early Vibrant domestic demand in emerging economies, rapid expansion in intra-regional trade, continued policy support as well as ongoing fiscal stimulus helped to overpower the influence of a gradual tightening of monetary and fiscal policies, rising commodity prices, the political turmoil in the Middle-East and North Africa, and the natural disaster and nuclear catastrophe in Japan. As the world economy rebounded from a contraction of 0.5% in 2009 into a growth of 5.1% in 2010 (source: International Monetary Fund), the strong performance of world economy had positively influenced the performance of most asset classes including most of the asset classes linked to Takaful myal-afdhal. To recap, Takaful myal-afdhal was an investment-linked product where its performance is linked to the global multi asset classes covering European sovereign bonds, Asian equity market, precious metal and copper commodities as well as Japanese property market ( Reference Assets ). In reflection of the improvement in the Reference Assets except for the Japanese property market, the Net Asset Value (NAV) per unit of Takaful myal-afdhal had been on an upward trend reaching a record high of RM1.067 on 28 April At the end of the financial year ended 19 June 2011, the NAV price per unit gained 12.0% to close at RM1.054 as compared to the last financial year s closing of RM In addition, we are pleased to highlight that the structure of investment in which the payout is based on the best performing portfolios either Defensive Overweight or Growth Overweight is proven to be beneficial to our valued investors. Based on the average of quarterly performance for 12 quarters since inception in US dollar term, Defensive Overweight gained 3.9% as compared to Growth Overweight which still recorded negative return of 4.5%. On this note, after taking into account the foreign exchange conversion factor and other relevant costs payable by the Fund, we are pleased to inform that the Fund had accordingly declared an annual gross profit distribution of 3.26 percent before withholding tax and net profit distribution of 3.00 percent for this financial year to our valued investors. The details computation of performance payout in US dollar term, which is based on the average of quarterly performance for 12 quarters starting from 16 September 2008 up to 16 June 2011 are as follows: Page 4

5 Defensive Basket Average of Quarterly Return for 12 Quarters % weight in the basket Performance of basket European Sovereign Fixed Income Index 13.9% 25% 20.6% Precious Metal Index 22.8% 75% Growth Basket Average of Quarterly Return for 12 Quarters % weight in the basket Performance of basket Copper (18.4%) 50% (21.2%) Asian Blue Chip Index (15.1%) 25% Japanese REIT Index (32.9%) 25% Portfolio Performance Defensive Basket Growth Basket Performance of Portfolio Defensive Overweight Portfolio Growth Overweight Portfolio 12.4% (8.5%) 3.9% 60% x 20.6% 40% x (21.2%) 12.4% + (8.5%) 8.2% (12.7%) (4.5%) 40% x 20.6% 60% x (21.2%) 8.2% + (12.7%) Going forward, we remain upbeat with the growth prospects of the world economy albeit at the modest pace in 2011 and International Monetary Fund has projected the world real gross domestic product (GDP) to grow by 4.3% in 2011 and 4.5% in 2012, down modestly from 5.1% in After experiencing above-trend growth in the previous year, the Asian economies are expected to continue to lead global growth although the momentum will moderate to a pace closer to their long-term averages. Notwithstanding the improving global growth prospects, downside risks to growth remain. Growing concerns about the sovereign debt in European countries, political turmoil in the Middle East and North Africa, high commodity prices, rising inflation and possible impact from Japan earthquake are expected to slow the pace of expansion in global trade, hence may impact the world economy. We believe that your investment is able to withstand any challenges ahead considering that the capital is protected if it is held until maturity in In addition to that, you will also continue to enjoy our Takaful protection. Last but not least, we would like to express our utmost appreciation and gratitude for your continuous support for Takaful Investment Link products and Takaful Malaysia. We will continue to strive and work hard to serve you better and achieve our mission to be the preferred choice for insurance. Let us invest in a better year ahead. May Allah give us His guidance, Amin. DATO MOHAMED HASSAN MD KAMIL Group Managing Director Page 5

6 FUND PROFILE Takaful myal-afdhal is a 5-year closed-ended investment-linked plan that allows participants to invest in a Shariahcompliant structured investment product. With its principal-protected feature if held until maturity, participants will enjoy coverage throughout the term while profiting from investment returns in the form of Annual Profits* from their lump-sum Single Contribution. The investment performance of Takaful myal-afdhal is subject to the performance of the underlying assets covering the European sovereign bonds, Asian equity market, precious metal and copper commodities as well as Japanese property market ( Reference Asset ). The following Reference Assets are used as a basis in calculating the annual investment performance : Reference Asset European Sovereign Fixed Income Index Precious Metal Index Copper Spot Asian Blue Chip Equity Index Japanese REITs Index Description An index for sovereign bonds in the Eurozone A commodity index that tracks the performance of gold and silver Copper Cash Price at a leading metal exchange An index comprising of top 50 Asian Blue-Chip companies An index on all Real Estate Investment Trusts (REIT) listed on the Japanese Stock Exchange The Reference Assets are grouped into two investment baskets, namely Defensive Basket and Growth Basket. Proportion of each Reference Asset within a basket is fixed upfront. For example, the Defensive Basket comprises 75% Precious Metal Index whilst the European Sovereign Fixed Income Index make up for the other 25%. Defensive Basket Growth Basket European Fixed Income Index, 25% Precious Metal Index, 75% Japanese REITs, 25% Asian Blue Chip Equity Index, 25% Copper, 50% * Subject to the actual performance of the investment. The returns on the structured product investment will be based on the performance of the Reference Assets whilst the principal will only be protected if investment is held to maturity. Page 6

7 From these two Baskets, two passive Portfolios are created Defensive Overweight Portfolio and Growth Overweight Portfolio. Each Investment Portfolio is constructed using a fixed proportion of the Defensive Basket and Growth Basket. Defensive Overweight Portfolio Growth Overweight Portfolio Defensive Basket, 60% Growth Basket, 40% Defensive Basket, 40% Growth Basket 60% Takaful myal-afdhal Annual Profit* distribution will be referenced to the best performing portfolio. * Subject to the actual performance of the investment. The returns on the structured product investment will be based on the performance of the Reference Assets whilst the principal will only be protected if investment is held to maturity. Page 7

8 FUND PERFORMANCE REVIEW Annual fund performance review for the period ended 19 June 2011 Strong performance of global economy last year and early this year had positively influenced the performance most of the indices linked to Takaful myal-afdhal such as Copper Spot, Asian Blue Chip Equity and Precious Metal Index. Gains in copper were underpinned by fading fears of China tightening monetary policy and more positive sentiment towards economic growth whereby the Asian Blue Chip Equity Index was bolstered by strong fund inflows into emerging markets. At the same time, worries over global risk particularly weakening USD, growing inflationary fears, turmoil in the Middle East and Northern Africa region, and concern over euro area credit worthiness have bolstered investor appetite for precious metals such as gold, hence lifted the Precious Metal Index to a higher level. Correspondingly, during the period under review, the Net Asset Value (NAV) of Takaful myal-afdhal was on an upward trend, in line with the improvement in asset classes tagged to the Growth Basket, particularly Copper and Asian Blue Chip Equity Index whereby Defensive Basket continued to improve with strong performance of the gold and silver in the Precious Metal Index. At the end of the financial year ended 19 June 2011, the NAV price per unit gained 12.0% to close at RM1.054 as compared to the last financial year s closing of RM Takaful myal-afdhal NAV per unit Performance Highest NAV: 28 Apr 11 RM NAV per unit Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun-11 Lowest NAV: 10 Sept 08 RM0.850 Page 8

9 The computation of performance return is based on the average of 12 quarters starting from 16 September 2008 up to 16 June 2011 is as follows: Defensive Basket Average of Quarterly Return for 12 Quarters % weight in the basket Performance of basket European Sovereign Fixed Income Index 13.9% 25% 20.6% Precious Metal Index 22.8% 75% Growth Basket Average of Quarterly Return for 12 Quarters % weight in the basket Performance of basket Copper (18.4%) 50% (21.2%) Asian Blue Chip Index (15.1%) 25% Japanese REIT Index (32.9%) 25% Portfolio Performance 1 Defensive Basket Growth Basket Performance of Portfolio Defensive Overweight Portfolio Growth Overweight Portfolio 12.4% (8.5%) 3.9% 60% x 20.6% 40% x (21.2%) 12.4% + (8.5%) 8.2% (12.7%) (4.5%) 40% x 20.6% 60% x (21.2%) 8.2% + (12.7%) 1 The performance of each portfolio is calculated as the total of the performance of both baskets, calculated based on the weights of each basket for the portfolio. As can be seen on the above table, the Defensive Basket which has a fixed 25% allocation into European Sovereign Fixed Income Index and 75% of Precious Metal Index has recorded positive return of 20.6% during the period under review. On the other hand, the negative performance on aggregate basis since inception for the Growth Basket which consists 50% of Copper, 25% of Asian Blue Chips Equity Index and 25% of Japanese REITs Index has yet to turn to positive despite exceptionally strong performance of Copper and Asian Blue Chip Index. Due to this, Growth Overweight portfolio although has improved from -14.4% in the previous year, it still recorded negative 4.5% this year. Meanwhile, Defensive Overweight portfolio which has recorded -6.8% in the previous year has turned to positive 3.9%. Page 9

10 200% 180% Performance of Underlying Since Inception 160% 140% Inception 120% Base % 80% 60% 40% 20% 0% 16-Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun-11 European Sovereign Fixed Income Index Asian Blue Chip Equity Index Japanese REITs Index Precious Metal Index Copper Spot Outlook The performance of Takaful myal-afdhal has been encouraging since the worst recession happened in the second half of 2008 in tandem with the strong performance of its Reference Assets which in turn related to the robust global economy recovery during the period. Going forward, the global economy is expected to continue its recovery, albeit at uneven and more moderate pace. The continued divergence in growth performance between the advanced economies and emerging market economies reflects the continuing impact of the global financial crisis on the potential growth path for the former. Asian economies is expected to continue as a main growth driver with the expansion will be mainly driven by sustained strength of domestic demand while external demand is projected to register a slower pace of improvement in line with the moderation in the advanced economies. For the US, the end of quantitative easing (QE) 2 may mean that its economy is strong enough to sustain the recovery without additional quantitative easing measures. In fact, monetary policy will remain extremely loose as the Fed plans to keep official interest rates at near 0% for an extended period of time. On the other hand, the Eurozone s which have seen the debt crisis resurfaced recently, is expected to find a solution to resolve it and will unlikely drag the Eurozone economy into another downturn. Whilst the peripheral countries such as Greece, Ireland and Portugal will likely fall back into recession due to severe fiscal tightening, the Eurozone s economic recovery will likely be sustained going forward, powered by Germany and France, the two largest economy in the region. Germany has been experiencing relatively strong economic recovery, leading to sustained increases in manufacturing and services activities in the Eurozone with business sentiment still intact. Page 10

11 At the same time, it is believed that China has enough policy ammunitions to steer its economy to an even keel situation. While inflation is still a major concern for policymakers, the situation could gradually improve as weather conditions improve and food prices ease in the 2H2011. With the economy showing visible signs of slowing, China can afford to loosen policy in the months ahead and in the process, avoid any hard landing for its economy. Overall, the global economy is expected to continue its recovery, albeit at uneven and more moderate pace and it is unlikely to foresee any double dip recession. The International Monetary Fund (IMF) is projected the world real gross domestic product (GDP) to grow at more moderate pace by 4.3% in 2011 and 4.5% in 2012 after recorded 5.1% in With the expectation of continued economic recovery going forward, this shall positively support the performance of Takaful myal-afdhal. Nevertheless, there are also some downside risks that may impact the growth. Growing concerns about the sovereign debt in European countries, political turmoil in the Middle East and North Africa, high commodity prices, rising inflation and possible impact from Japan earthquake are among the factors that can affect the world economy, hence may also impact the performance of some of Takaful myal-afdhal s Reference Assets. The performance review and outlook of each underlying asset classes is detailed out in Appendix of the report. Fees/Charges levied to the Fund Syarikat Takaful Malaysia Berhad is allowed to charge a Fund management fee of up to 1% p.a. of Net Asset Value (NAV). Details on Distribution Syarikat Takaful Malaysia Berhad has declared an annual gross profit distribution of 3.26 percent before withholding tax and net profit distribution of 3.00 percent for this financial year. Financial Year Ended 19 June 2011 Profit distribution per unit Gross profit distribution Net profit distribution 3.26 sen 3.00 sen Impact on NAV per unit arising from profit distribution for the financial year ended 19 June 2011 is as follows : Financial Year Ended 19 June 2011 Net asset value before distribution Less : Net distribution per unit Net asset value after distribution RM1.054 (RM0.030) RM1.024 Descriptions of any changes in Fund s Objectives and Strategies There were no material changes in fund s objectives and strategies for the period ended 19 June Page 11

12 APPENDIX Performance review & outlook on individual asset class 1. European Sovereign Fixed Income Index 2. Precious Metal Index 3. Copper Spot 4. Asian Blue Chip Equity Index 5. Japanese REITs Index Page 12

13 APPENDIX PERFORMANCE REVIEW & OUTLOOK OF INDIVIDUAL ASSET CLASS 1. EUROPEAN SOVEREIGN FIXED INCOME INDEX 125.0% 120.0% Change in investment values (%) 115.0% 110.0% 105.0% 100.0% 16-Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun-11 Initial Strike ( ) Quarter 1 ( ) Quarter 2 ( ) Quarter 3 ( ) Quarter 4 ( ) Quarter 5 ( ) Quarter 6 ( ) (+4.2%) (+8.6%) (+9.8%) (+10.5%) (+14.4%) (+15.7%) Quarter 7 ( ) Quarter 8 ( ) Quarter 9 ( ) Quarter 10 ( ) Quarter 11 ( ) Quarter 12 ( ) Average Return for 12 Quarters (+17.2%) (+17.3%) (+19.6%) (+15.9%) (+16.7%) (+16.6%) +13.9% Note : Percentage change of price in value is computed by comparing to the Initial Strike Page 13

14 Review After a sharp contraction of -4.1% in 2009, real GDP in the Euro Area expanded modestly by 1.7% in 2010 amid periodic episodes of sovereign debt problems in the peripheral economies such as Greece, Ireland and Portugal. The recovery was uneven, largely due to the strong export-led growth in the core economies, in particular Germany, while the peripheral economies experienced weak domestic demand conditions, weighed down by the imposition of fiscal austerity measures and the consequent deterioration in consumer confidence amid large layoffs in the public sector. In view of the divergence in growth among the Euro member countries and the persistent financial market uncertainty surrounding the ability of the peripheral economies to raise funding, the European Central Bank (ECB) decided to maintain an accommodative monetary policy stance throughout the year. The outbreak of the Greek crisis prompted further quantitative easing in May 2011 through the introduction of the Securities Market Programme to purchase both government and private sector bonds in the euro area. The ECB also reintroduced several of its liquidity facilities to extend unlimited short-term funds to the banking sector to ease funding strains given the banks exposure through holdings of sovereign papers. These measures undertaken by the ECB have provided a support to European bonds throughout the period under review with the European Sovereign Fixed Income Index continued to record positive average return of 13.9%. Outlook The recovery in Europe continues to face substantial headwinds from uncertainty surrounding sovereign debt in several Euro Area members, and a wide-reaching but necessary process of fiscal consolidation. Nevertheless, outturns in Germany and France have shown increasing strength amid robust private sector activity will likely sustain growth in these economies. But in many other countries, growth is becoming constrained by fiscal austerity measures, high unemployment, fragile financial systems and tight credit conditions. As monetary policy has entered a renewed tightening phase, additional stresses in the financial sector may become more apparent, presenting further challenges for these economies. Nevertheless, there is some relieved that European Union (EU) and International Monetary Fund (IMF) have approved the fifth disbursement of the 110bn bailout fund on 3 June 2011 and Germany has softened its demand and is willing to go along with the ECB for a voluntary restructuring of Greece s debt to prevent triggering a situation of default. For the European bonds, it is expected for the index to remain resilience as there is increasing probability that the debt problem in Greece being contained. Page 14

15 2. PRECIOUS METAL INDEX 200.0% 180.0% 160.0% Change in investment values (%) 140.0% 120.0% 100.0% 80.0% 60.0% 16-Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun-11 Initial Strike ( ) Quarter 1 ( ) Quarter 2 ( ) Quarter 3 ( ) Quarter 4 ( ) Quarter 5 ( ) Quarter 6 ( ) (-16.3%) (-10.3%) (-1.2%) (0.3%) (+10.9%) (+22.0%) Quarter 7 ( ) Quarter 8 ( ) Quarter 9 ( ) Quarter 10 ( ) Quarter 11 ( ) Quarter 12 ( ) Average Return for 12 Quarters (+20.3%) (+31.1%) (+36.5%) (+51.5%) (+58.1%) (+71.2%) +22.8% Note : Percentage change of price in value is computed by comparing to the Initial Strike Page 15

16 Review Precious Metal Index has performed an exceptionally well with the quarterly average gold price posted its eighth consecutive increase, hitting a new record high of USD1,575/oz in April There was notably strong investors appetite for gold in the last 2½ years as it was considered as the safe haven investment during the period of growing inflationary fears, weakening USD and increased in global risk. The World Gold Council noted that the increase in gold price was largely attributable to a widespread rise in investment demand, which was further enhanced by an improvement in jewellery demand in a number of key markets especially from China and India, and also significant purchases by central banks across number of regions as a means of diversifying their reserves asset. Additionally, gold also being supported by expectations that interest rates will remain low for an extended period, hence will keep the opportunity cost of holding gold low. Based on the initial strike price for the Precious Metal Index, the index has registered an average return of 22.8%, which has contributed positively to the Defensive Basket of Takaful myal-afdhal. Outlook In the report dated April 2011, the World Gold Council anticipated that the global gold demand to remain robust with the concerns of unsettled debts sovereign problems in Europe, persistent high inflation in the number of countries, lack of confidence in the USD, strong jewellery market demand, central bank buying and potentially ongoing geo-political risks. It is also noted that China will continue to act as the main engines growth for the gold demand going forward given the increasing prosperity in the world s most populous country. Hence, it is expected the long term gold price to remain resilience although short term trend could become very volatile due to strong price rally previously. Page 16

17 3. COPPER SPOT 140.0% 120.0% Change in investment values (%) 100.0% 80.0% 60.0% 40.0% 20.0% 16-Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun-11 Initial Strike ( ) Quarter 1 ( ) Quarter 2 ( ) Quarter 3 ( ) Quarter 4 ( ) Quarter 5 ( ) Quarter 6 ( ) 8, , (-17.1%) 3, (-63.4%) 3, (-55.3%) (-38.8%) 6, (-23.5%) 6, (-15.9%) Quarter 7 ( ) 7, (-11.2%) Quarter 8 ( ) 6, (-20.1%) Quarter 9 ( ) 7, (-7.1%) Quarter 10 ( ) 9, (+9.6%) Quarter 11 ( ) 9, (+13.3%) Quarter 12 ( ) Average Return for 12 Quarters 9,011.5 (+9.2%) -18.4% Note : Percentage change of price in value is computed by comparing to the Initial Strike Page 17

18 Review After plunging to its low during the second half of 2008, Copper spot has recovered strongly and persistently on an upward trend in the last two years as demand is observed to be turning around globally and outpacing the economic recovery. Positive sentiment also emerged from China, being the world s strongest demand country for copper on large restocking to cater for its rapid urbanization program. With the stronger than anticipated global demand for commodities, coupled with the supply constrains amidst adverse weather condition, worries on political unrest in the Middle East and North Africa region, and expected reconstruction demand in Japan after the earthquake, caused a strong, sustained and broad-based increase in commodities prices. In addition to real demand, demand from increased speculative activity in the commodity markets also exerted upward pressures on global commodity prices as commodities became financial investment target amidst excess global liquidity. The strong rebound in Copper spot price during the period under review has reduced the negative average return from 30.6% in the previous year to -18.4% this year. Outlook Over the past two years, robust demand from China, supply constraints, ample liquidity from loose monetary policy, weakening USD and increase in global economic risks lifted the demand outlook for base metals, notably copper and pushed the prices to new highs. The recovery however has been tapering off recently as concerns about the economy strength of the developed countries, the end of quantitative easing 2 (QE2) and prospect of policy tightening in the emerging economies especially in China have elevated the risk aversion toward commodities markets. As such, commodity prices including copper are expected to be more vulnerable in this environment. Nevertheless, there are also several factors that are likely to continue supporting commodity prices over the medium and long term. These include the ongoing global recovery with strong than expected emerging markets growth, a continued weakening USD, adverse weather conditions, speculative activity in the commodity markets and the prospect of higher demand for commodities for inflation protection. Page 18

19 4. ASIAN BLUE CHIP EQUITY INDEX 120.0% 100.0% Change in investment values (%) 80.0% 60.0% 40.0% 16-Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun-11 Initial Strike ( ) Quarter 1 ( ) Quarter 2 ( ) Quarter 3 ( ) Quarter 4 ( ) Quarter 5 ( ) Quarter 6 ( ) (-22.6%) (-39.3%) (-46.8%) (-26.0%) (-10.5%) (-8.8%) Quarter 7 ( ) Quarter 8 ( ) Quarter 9 ( ) Quarter 10 ( ) Quarter 11 ( ) Quarter 12 ( ) Average Return for 12 Quarters (-10.8%) (-13.9%) (-7.4%) (+0.9%) (+2.0%) (+2.5%) -15.1% Note : Percentage change of price in value is computed by comparing to the Initial Strike Page 19

20 Review The strong performance of Asian economies last year and early this year had boosted the investors sentiment towards Asian stock markets. The recovery of the financial markets in emerging economies was also bolstered by the excess global liquidity situation, arising from the sizeable injection of funds into the international monetary system, leading to a surge of capital flows into emerging economies. Data from fund tracker Emerging Portfolio Fund Research (EPFR) Global showed inflows into emerging market equity and bond funds have continued, with a total of USD$101 billion flowing into emerging market equity funds since the start of Correspondingly, Asian Blue Chip Equity Index had registered strong performance, rebounded by 19.1% during the period under review but due to higher negative performance of the earlier quarters, the index is still recorded the average return of -15.1% from its initial value. Outlook After an exceptionally strong recovery in the previous year, economic growth in the Asian economies is expected to return to a more normal pace in The expansion will be mainly driven by sustained strength of domestic demand while external demand is projected to register a slower pace of improvement in line with the moderation in the advanced economies. Given the continuing divergence in growth between the advanced and emerging economies amid ample global liquidity, capital inflows are expected to continue to flow to emerging markets. Nevertheless, the trading momentum is expected to be more volatile as growing concerns about sovereign debt in European countries, the end of quantitative easing (QE) 2, rising inflation and the prospect of tightening measures in the emerging economies have combined to slow the pace of equity portfolio inflows to the emerging markets in Asia. Page 20

21 5. JAPANESE REITs INDEX 120.0% 100.0% Change of investment values (%) 80.0% 60.0% 40.0% 16-Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun-11 Initial Strike ( ) Quarter 1 ( ) Quarter 2 ( ) Quarter 3 ( ) Quarter 4 ( ) Quarter 5 ( ) Quarter 6 ( ) (-17.3%) (-36.7%) (-45.1%) (-37.9%) (-29.6%) (-39.2%) Quarter 7 ( ) Quarter 8 ( ) Quarter 9 ( ) Quarter 10 ( ) Quarter 11 ( ) Quarter 12 ( ) Average Return for 12 Quarters (-34.9%) (-35.7%) (-36.5%) 1, (-23.2%) (-30.8%) 1, (-27.6%) -32.9% Note : Percentage change of price in value is computed by comparing to the Initial Strike Page 21

22 Review On Japanese REIT market, strong performance of its economy in 2010 to register 4.0% GDP growth against the contraction of 6.3% in 2009 boosted the Japanese stock market in the final quarter of 2010 before negatively impacted by the massive earthquake and tsunami in March Consequently, Japan s economy, the world s third largest, had slid back into recession in the first quarter of 2011 with GDP contracted 3.7% yearon-year due to sharp contraction in economic activity amidst supply disruptions, affecting industrial production, consumer sentiment and spending. Due to the unexpected event, the Japanese REITs index continued to register negative performance with average return of -32.9% from its initial value. Outlook Japan economy is showing increasing signs of recovery following the March 2011 earthquake disasters. The supply side constraints have eased as evident by improving Japan s industrial production which had strengthened to 5.7% month-on-month in May, after recovering to a modest growth of 1.6% in April and from a sharp contraction of 15.5% in March. Consumer spending is also picking up as sentiment recovers and public worries about nuclear radiation dissipate. Investment demand stemming from post-quake reconstruction of infrastructures and properties also seems to be kicking in. Indicators including housing starts and construction orders have showed upticks in May. It seems increasingly likely that the economy will hit bottom in the second quarter (2Q), and GDP growth will return to the positive territory from 3Q onwards. This should augurs well to the Japanese property market which in turn positive for the Japanese REITs Index, although the impact is expected to be limited due to progress reconstruction spending. Page 22

23 SOFT COMMISION RECEIVED BY THE MANAGER Soft commissions received from brokers may be retained by the Manager on behalf of the funds provided that the services rendered are related to the management of the investment linked funds and of demonstrable benefit to certificate owners as per the requirements of Clause 6.2 of the Guidelines on Investment-Linked Insurance/Takaful Business. During the financial year under review, the Manager had received on behalf of the funds, soft commissions in the form of research materials and investment related publications from Citibank Berhad which are incidental to the investment management of the funds. Page 23

24 STATEMENT BY DIRECTORS OF THE MANAGER In the opinion of the Manager, the Takaful Al Afdhal Investment-Linked Fund ( Fund ) financial statements set out on pages 27 to 31, comprising the Statement of Assets and Liabilities as at 19 June 2011 and the related Statement of Income and Expenditure, Statement of Changes in Net Asset Value and Statement of Cash Flows for the financial year ended 19 June 2011 together with the notes thereto, have been drawn up in accordance with the accounting policies set out in Note 1 and Guidelines on Investment-Linked Insurance/Takaful Business issued by Bank Negara Malaysia and give true and fair view of the financial position of the Fund as at 19 June 2011 and its financial performance and cash flows for year ended on that date. Signed in accordance with a resolution of the Directors: Dato Paduka Ismee Ismail Dato Mohamed Hassan Kamil Kuala Lumpur, Date: 21 August 2011 Page 24

25 REPORT OF THE AUDITORS to the unitholders of the Takaful Malaysia s Al-Afdhal Investment-Linked Fund (Company No K) (Incorporated in Malaysia) Report on the Financial Statements We have audited the financial statements of Takaful Malaysia s Al Afdhal Investment-Linked Fund ( Fund ) of Syarikat Takaful Malaysia Berhad, which comprise the Statement of Assets and Liabilities as at 19 June 2011, and the related Statement of Income and Expenditure, Statement of Changes in Net Asset Value and Statement of Cash Flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 27 to 31. Directors Responsibility for the Financial Statements The Directors of the Manager are responsible for the preparation of these financial statements that give a true and fair view in accordance with the Guidelines on Investment-Linked Insurance/Takaful Business, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Fund s preparation 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 Fund s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors of the Manager, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Page 25

26 Company No K Opinion In our opinion, the financial statements have been properly drawn up in accordance with the accounting policies set out in Note 1 to the financial statements and the Guidelines on Investment-Linked Insurance/Takaful Business so as to give a true and fair view of the financial position of the Fund as of 19 June 2011 and of its financial performance and cash flows ended on that date. Other Matters This report is made solely to the unitholders of Takaful Malaysia s Al Afdhal Investment-Linked Fund, as a body, in accordance with the Guidelines on Investment-Linked Insurance/Takaful Business and for no other purpose. We do not assume responsibility to any other person for the content of this report. KPMG Desa Megat & Co. Firm Number: AF 0759 Chartered Accountants Petaling Jaya, Selangor Date: 21 August 2011 Page 26

27 STATEMENT OF ASSETS AND LIABILITIES AS AT 19 JUNE 2011 ASSETS Note RM RM Shariah compliant structured investment 2 71,927,419 83,499,927 CURRENT LIABILITIES 71,927,419 83,499,927 Provision for deferred tax 8,971 - Other liabilities 448, , , ,642 Net Asset Value 71,469,997 82,660,285 REPRESENTED BY Certificate holders Capital 65,415,152 84,779,384 Accumulated income/(losses) carried forward 6,054,845 (2,119,099) 71,469,997 82,660,285 Units in circulation 67,787,723 87,854,284 Net asset value per unit Page 27

28 STATEMENT OF INCOME AND EXPENDITURE FOR FINANCIAL YEAR ENDED 19 JUNE 2011 Income Note RM RM Fair value gain on investment 8,658,127 5,052,135 Other income 3 787, ,933 Total income 9,445,722 5,870,068 Outgo Investment management fees 448, ,595 Total outgo 448, ,595 Excess of income over outgo before taxation 8,997,271 5,082,473 Taxation 4 ( 8,971) - Excess of income over outgo after taxation 8,988,300 5,082,473 STATEMENT OF CHANGES IN NET ASSET VALUE FOR FINANCIAL YEAR ENDED 19 JUNE RM RM Net asset value at the beginning of the financial year 82,660,285 87,861,865 Cancellation of units (20,178,588) (10,284,053) Excess of income over outgo after taxation 8,988,300 5,082,473 Net asset value at the end of financial year 71,469,997 82,660,285 Page 28

29 STATEMENT OF CASH FLOWS FOR FINANCIAL YEAR ENDED 19 JUNE RM RM Cash flow from operating activities Income before taxation 8,997,271 5,082,473 Adjustment for: Fair value gain on investment (8,658,127) (5,052,135) Gain from operations before changes in operating assets and liabilities 339,144 30,338 Proceeds from disposal of investment 20,230,634 10,280,415 Increase in other liabilities (391,190) (26,700) Cash generated from operations 20,178,588 10,284,053 Cash flow from financing activities Payment for cancellation of units (20,178,588) (10,284,053) Net cash used in financing activities (20,178,588) (10,284,053) Net increase in cash and cash equivalents - - Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year Page 29

30 NOTES TO THE FINANCIAL STATEMENTS The Manager and its principal activities The Manager is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of its registered office and principal place of business of the Company is located at: 26 th Floor, Annex Block Dataran Kewangan Darul Takaful No.4, Jalan Sultan Sulaiman Kuala Lumpur The Manager is principally engaged in managing family and general takaful business. The family takaful business includes investment-linked products. The Al Afdhal investment linked-fund ( Fund ) annual anniversary date ends on 19 June in accordance to the certificate documents. The financial statements of the Fund were approved by the Board of Directors of the Manager on 21 August Summary of significant accounting policies The accounting policies set out below have been applied consistently by the Fund to periods presented in these financial statements, unless otherwise stated. (a) Basis of accounting The financial statements have been prepared in accordance with the notes set out in Note 1, The Guidelines on Investment Linked Insurance/Takaful Business issued by Bank Negara Malaysia The Guidelines on Investment-Linked business and the requirements of the certificate document. (b) Functional and presentation currency These financial statements are presented in Ringgit Malaysia (RM), which is the fund s functional currency. All financial information presented in RM has been rounded to the nearest thousand, unless otherwise stated. (c) Investments Structured investments that comprise structured deposits and options are stated at the fair value based on valuation provided by Citibank Berhad (being the Calculation Agent) at the statement of assets and liabilities date. The returns on the structured product investment will be based on performance of the following Reference Assets whilst the principal will only be protected if the investment is held until maturity. Reference Asset Description 1. European Sovereign Fixed Income Index An index for sovereign bonds in Eurozone 2. Precious Metal Index A commodity index that tracks the performance of gold and silver 3. Copper Spot Copper Cash Price at a leading metal exchange 4. Asian Blue Chip Equity index An index comprising of Asian Blue-Chip companies 5. Japanese REITs Index An index on all Real Estate Investment Trusts (REIT) listed on the Japanese stock exchange (d) Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with financial institutions and highly liquid investments which have insignificant risk of changes in value. (e) Net Creation of Units Net creation of units represents contributions paid by participants as payment for new certificates. Net creation of units is recognized on a receipt basis. Page 30

31 NOTES TO THE FINANCIAL STATEMENTS 1. Summary of significant accounting policies (continued) (f) Net Cancellation of Units Net cancellation of units represents cancellation of units arising from the surrenders and withdrawals by participants. Net cancellation of units is recognized upon surrendering of the related takaful certificates. (g) Investment management fees Investment management fees are accrued in accordance with the provisions of the certificate document which is an amount of up to 1% per annum of net asset value. 2. Shariah compliant structured investment The structured investment comprises the following assets: Structured deposits Options Total RM RM RM Cost 57,248,434 8,166,718 65,415,152 Unrealised fair value gain 5,699, ,021 6,512,267 Fair value 62,947,680 8,979,739 71,927, Cost 80,535,777 4,243,607 84,779,384 Unrealised fair value loss (1,215,414) (64,043) (1,279,457) Fair value 79,320,363 4,179,564 83,499, Other income Subsequent to year ended on 19 June 2009 and 2010, management decided to waive the accrued management fees and accordingly reflected this as other income. 4. Tax expense Tax expense comprises deferred tax. Provision for deferred tax is recognised on taxable and deductible temporary differences using a tax rate of 8%, being the statutory rate applicable to family takaful business. Page 31

32 COMPARATIVE PERFORMANCE TABLE The performance data since inception is as follows: Jun Jun Jun-09 Composition of Fund (a) Structured Deposits 87.52% 94.99% 96.93% (b) Options 12.48% 5.01% 3.07% Net Asset Value (NAV) and Units in Circulation Total NAV (RM) 71,469,997 82,660,285 89,502,239 Number of units 67,787,723 87,854,284 98,976,909 NAV per unit (RM) 1.054* Highest NAV per unit (RM) Lowest NAV per unit (RM) Total Annual Return (% p.a) a) Capital Growth (inclusive income distribution) (6.29) b) Income Distributions 3.00 Nil Nil Average Annual Return (%) One-Year (6.29) Three-Year 3.27 * NAV per unit is before income distribution Page 32

33 Page 33