TAIslamicFund. Forthe nancialyearended 31May2018 ( T)

Transcription

1 AnnualReport TAIslamicFund Forthe nancialyearended 31May2018 ( T)

2 Contents Contents 1 Key Performance Data 2 Manager s Report 4 Market Review 7 Economic Outlook 8 Market Outlook And Investment Strategy 9 Size of Unitholdings 9 Soft Commission 9 Trustee s Report 10 Statement By The Manager 11 Shariah Adviser s Report 12 Independent auditors' report to the unitholders of TA Islamic Fund 13 Statement Of Comprehensive Income 16 Statement Of Financial Position 17 Statement Of Changes In Equity 18 Statement Of Cash Flows 19 Notes To The Financial Statements 20 Corporate Information 54 1

3 Key Performance Data Year Ended Year Ended Year Ended 31/05/ /05/ /05/2016 PORTFOLIO COMPOSITION (% OF NAV) Construction Consumer Products Industrial Products Infrastructure Finance Energy Technology Plantations Trading/ Services Properties Oil & Gas Mining Power Islamic REITs Quoted Shariah-compliant Shares Shariah-compliant Derivative Islamic Deposits and Others Total Shariah-compliant Investment Total Net Asset Value (RM'000) 47,051 # 62,251 66,951 Units In Circulation (Units '000) 146, , ,789 Net Asset Value Per Unit (RM) # Management Expense Ratio (MER) (%) * Portfolio Turnover Ratio (PTR) (times) ** # Refer to audited account Note 13. * The MER for the current financial year has remains consistent with that of the previous financial year. ** The PTR for the current financial year has decreased as compared to previous financial year due to decrease in average transaction value of the Fund. UNIT PRICES ^ NAV Per Unit (RM) Highest NAV Per Unit for the Year (RM) Lowest NAV Per Unit for the Year (RM) ^ Ex-distribution 2

4 Year Ended Year Ended Year Ended 31/05/ /05/ /05/2016 DISTRIBUTION Gross Distribution Per Unit (sen) Final Nil Interim Nil 1.50 Nil Net Distribution Per Unit (sen) Final Nil Interim Nil 1.50 Nil Date of Distribution Final 31/05/ /05/2017 Nil Interim Nil 30/06/2016 Nil TOTAL RETURN (%) Capital Return Income Return Total Return of Fund Total Return of the Benchmark - FTSE Bursa Malaysia Emas Shariah Index FTSE Bursa Malaysia KLCI AVERAGE TOTAL RETURN (%) Fund Benchmark Period 1 Year (31/05/ /05/2018) Years (31/05/ /05/2018) Years (31/05/ /05/2018) ANNUAL TOTAL RETURN (%) Fund Benchmark Period 31/05/ /05/ /05/ /05/ /05/ /05/ /05/ /05/ /05/ /05/ Source : Lipper for Investment Management Past performance is not necessarily indicative of future performance. Unit prices and investment returns may go down, as well as up. 3

5 Manager s Report TA Islamic Fund Fund Category/Type Fund Objective Fund Benchmark Fund s Distribution Policy Fund Performance and Investment Strategies Employed Equity (Islamic) / Growth. The Fund aims to achieve steady capital growth over the medium to long term period by investing in a portfolio of authorised investments which conforms strictly to Shariah principles. FTSE Bursa Malaysia EMAS Shariah Index (FBM EMAS Shariah). The Fund may declare annual/interim distribution (if any) during its financial year. The Fund was managed within its investment objective for the financial year under review. The Fund however did not meet its objective in providing positive capital return. For the financial year ended 31st May 2018, the Fund posted a negative return of -11.6% and underperformed the FTSE Bursa Malaysia EMAS Shariah Index s ( FBM EMAS Shariah ) of -4.91%. The sudden turn in the market post the 14 th General Election has affected performance especially on its construction weightage. The Fund Manager has maintained a prudent strategy in the selection of Shariah-compliant stocks, emphasising on growth companies with strong fundamentals, clear earning visibility as well as high dividend yields. Analysis of Fund Performance 31/05/18 31/05/17 % Change NAV/unit (RM) ^ Total NAV (RM 000) 47,051^ 62, ^ Refer to audited account Note 13. Income Distribution (%) Capital Return # (%) Total Return (%) # Capital Return components: Shariah-compliant Equity 4

6 Islamic Deposits 31/05/18 31/05/17 % Change FBM Emas Shariah 12, , FTSE Bursa Malaysia KLCI 1, , Performance Chart Distributions During the financial year, the Fund declared a gross distribution of 0.40 sen per unit on 31 May The effect on NAV arising from the distribution for the financial year ended 31 May 2018 is as follows: Date 31/05/18 31/05/17 NAV Before Distribution (RM) Gross Distribution (RM) NAV After Distribution (RM) Final Interim - Nil Final 0.40 sen Interim - Nil Final Interim - Nil Final Interim Final 2.30 sen Interim 1.50 sen Final Interim Asset Allocation 31/05/18 31/05/17 Islamic Deposits and Others 21.65% Shariahcompliant Derivatives Instrument 0.13% Quoted Shariah-compliant equity 78.22% Islamic Deposits and Others 14.43% Quoted Shariah-compliant equity 85.57% 5

7 Asset allocation during the financial year under review was primarily in Shariah-compliant equities with the remaining in Islamic Deposits and Shariah-compliant Derivatives Instrument. The Fund s asset allocation was based on market conditions, as and when the Fund Managers see fit to increase and decrease the Shariah-compliant equity proportions. Top Investments Top 5 Shariah-compliant Stocks As at 31/05/2018 % NAV Tenaga Nasional Berhad 9.71 BIMB Holdings Berhad 4.65 Axiata Group Berhad 4.21 Kelington Group Berhad 4.19 PPB Group Berhad 3.92 As at 31/05/2017 % NAV Sime Darby Berhad 8.58 Tenaga Nasional Berhad 7.89 BIMB Holdings Berhad 3.92 Seacera Group Berhad 3.83 Axiata Group Berhad 3.59 Past performance is not necessarily indicative of future performance. Unit prices and investment returns may go down, as well as up. 6

8 Market Review While global indices continued their uptrend towards second half of 2017, however, the local bourse failed to sustain its strong momentum through third quarter of 2017 ( 3Q17 ) as corporate earnings disappointed for two consecutive quarters. Generally, more companies failed to meet the street s estimates with 37% underperformers for 3Q17 results from 32% in 1Q17. This was coupled with weak manufacturing Purchasing Manager s Index ( PMI ) which hit record low in June The stronger-than-expected 3Q17 Malaysia Gross Domestic Product ( GDP ) growth of 6.2% did not excite the market. Foreign funds net sold the local market by more than RM1.5billion from August 2017 to November 2017 before they turned net buyer again in December 2017 (+RM959.9 million) following the news on significant progress made for the United States ( US ) tax overhaul plan. Malaysia s Budget 2018 announced was well within expectation and did not provide much boost to the market. On 30 November 2017, Organization of the Petroleum Exporting Countries ( OPEC ) and non-opec producers pledged to continue reducing crude oil supply by 1.8 mil barrels per day for another nine months from March 2018 until December In December 2017, the FBMKLCI advanced 4.6% to 1, points, the highest daily closing level for the year, raising the full year s gain to 9.4%. The Malaysian Ringgit ( MYR ) also strengthened 9.8% against the United States Dollar ( USD ) in 2017 (+1.1% in December 2017). During the month, the US Federal Reserve ( Fed ) raised interest rates by 25 basis points ( bps ) for the third time in 2017 to a range of between 1.25% and 1.5% but market players see this as positive because it meant that US economic growth and inflation were within the Fed s expectations. Overall, foreign funds pumped in net amount of RM10.3 billion in 2017 after having net sold for the past three years. Foreign buying momentum continued into January 2018, pushing the FBMKLCI up by 4.0% to 1,868.58, a daily closing level not seen since The broader FBMEmas increased 3.3% while the FBM Small Cap Index rose marginally by 0.2%. Most regional markets rose around 4% but the MSCI Asia Pacific gained 5.9% due to exceptional gains achieved in the Hong Kong market (+9.9%) and China s CSI 300 index (+6.1%). Foreign funds net bought RM3.4 billion in Malaysian equities in January 2018, in tandem with strong buying activities by foreign funds in the region, especially in Korea, Taiwan and India. Many factors contributed to the optimism in equities in January The slash in tax rates by the Trump government has led the Federal Open Market Committee ( FOMC ) members to revise up the 2018 US GDP growth forecast to 2.5% from 2.1% in anticipation of better earnings. Meanwhile, in February 2018, foreign investors turned net sellers of RM1.12 billion. In the region, foreign funds reversed their strong buying momentum in January 2018 into heavy selling activities in February Based on the Malaysian Industrial Development Finance ( MIDF ) Research s data on seven regional markets, most of the foreign net selling took place in Taiwan, Korea and India. In March 2018 the FBMKLCI gained 0.3% (after the loss of 0.7% in February 2018), making it only one of three markets which recorded positive performance in Asia. For the first quarter 2018, the FBMKLCI was best performer in Asia, having risen 3.6% compared to the MSCI Asia Pacific s drop of 0.6%, the Dow Jones Industrial Index s -2.5% and Nasdaq s +2.3%. While the big caps supported the FBMKLCI, small and mid-caps suffered heavy selling during the month as reflected in the sharp drop of 11.3% in the FBM Small Cap Index (-13% 1Q2018) and the decline of 1.5% in the broader FBM Emas 7

9 (+0.6% for 1Q2018). The resilience of the local index could be attributed largely to net foreign fund buying big cap stocks which totalled RM2.2 billion for the first three months of 2018 (-RM61.4million in March 2018) and support of blue chips by institutional funds ahead of the upcoming general election. In April 2018, the local benchmark gained 0.4% to close at 1,870.37, lifting the return of the first four months of 2018 to 4.1% and making it the second best performing market in Asia (after Singapore s +6.2%), attributed largely to window dressing activities on the last day and support from foreign fund inflows which totalled RM1.5 billion (RM3.7 billion for 2018). During the month, global markets were jolted by trade tensions between the US and China, President Trump s remarks on Russia and the US threat to attack Syria. While in May 2018, the FBMKLCI tumbled 6.9% in May 2018 largely due to net selling by foreign funds every single trading day in May Total net outflow of foreign funds from Malaysian equities was RM5.6 billion for the month, erasing all the net inflows up to April 2018, resulting in a net outflow of RM1.9 billion as at end of May Foreign funds also net sold in Asia throughout May 2018 albeit at a tapered pace. Such selling was reflected in the MSCI Asia Pacific index s drop of 1.1% for the month. Global funds dumped Malaysian stocks following the surprise win by Pakatan Harapan which ended Barisan Nasional s 61 years rule of the government and quick policy changes such as cancellation of mega infrastructure projects, the abolition of Goods and Services Tax ( GST ) and the potential abolishment of toll. Economic Outlook 2018 is expected to face some volatility in the market with the rising trade tension that will create a lot of noises in the market. As a result of the rising trade tension, investors will be in a risk-off mode. The rising tensions between the United States ( US ) and other major countries especially China continued to weigh on equities markets, with key Asian markets including Bursa Malaysia following Wall Street lower. The overnight correction on Wall Street sparked by fears over wider trade restrictions on technology should spread to the region and locally to further depress sentiment. Meanwhile following Pakatan Harapan s ( PH ) 14 th General Election win, the Ministry of Finance ( MoF ) announced that effective 1 June 2018, GST will be reduced from 6% to 0% for all goods and services. The 0% GST rate, along with the continued stabilisation of petrol prices is anticipated to boost consumption activity. In order for the government to cover for the revenue gap, the government will be reviewing all mega-infrastructure projects and undertake rationalisation initiatives of government spending to reduce inefficiencies, plug wastage and leakages. Additionally, OPEC agreed to return to 100% compliance as agreed in OPEC compliance was around 152% in Quarter , while non-opec was around 84% in Quarter Since, the government has factored only USD52 per barrel crude oil price in its Budget 2018 revenue assumptions, every additional USD1 per barrel will add another RM300million in government revenue and lower deficit by 2 bps. In March 2018, the US Fed raised its benchmark interest rate by 25 bps to between 1.50% and 1.75%, leaving its door open for two to three more rate hikes this year following stronger economic growth and rising inflation expectations. The Fed signalled greater 8

10 confidence and affirmed an upbeat economic outlook with gains in employment, household spending and business investment. Apart from good labour market and robust employment growth, consumer and business spending could also deliver a further boost because of recent declines in the US dollar and gains in stock prices and tax reform bill passed by President Trump administration. Market Outlook And Investment Strategy Volatility in the market remained high due to geopolitical and policy uncertainties. The continued rise in the US interest rates is causing some concerns or readjustments of the flow of funds due to rate hike although it is an indication of strong economic growth in the US. We see more upside resistance in the market as investors are easily spooked. The domestic Malaysian market is also going through a readjustment phase due to the recent change of government. Fund managers are actively restructuring their portfolios to take into consideration new political affiliations and changes in industries' prospect. A good example would be the construction sector where the cancellation of numerous mega projects has significantly dimmed its outlook. It is hoped that this readjustment phase with its corresponding uncertainties won't last long and the country's economy would emerge stronger. We are hopeful for a better future and market. As our Funds have raised cash earlier, we target to pick up fallen Shariah-compliant stocks based on their core values. Size of Unitholdings - 31 May 2018 Size of Holdings (units) No. of Unitholders % of Unitholders No. of Units Held ('000) % of Units Held 5,000 and below % % 5,001-10, % 2, % 10,001-50,000 1, % 35, % 50, , % 96, % 500,001 and above % 11, % Total 2, % 146, % Soft Commission The Manager retains soft commissions received from brokers only if the goods and services are of demonstrable benefits to the unitholders as allowed under the Securities Commission's Guidelines on Unit Trust Funds. The soft commission received include research and advisory services which are used to support the investment decision making process and are of demonstrable benefit to Unitholders of the Fund. 9

11 TRUSTEE'S REPORT FOR THE FINANCIAL YEAR ENDED 31 MAY 2018 TO THE UNITHOLDERS OF TA ISLAMIC FUND We, UNIVERSAL TRUSTEE (MALAYSIA) BERHAD ("the Trustee"), being the Trustee of TA ISLAMIC FUND ("the Fund"), are of the opinion that TA INVESTMENT MANAGEMENT BERHAD ("the Manager"), acting in the capacity as Manager of the Fund, has fulfilled its duties in the following manner for the financial year ended 31 May (a) (b) (c) (d) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager and the Trustee under the Deed, other provisions of the Deed, the Securities Commission's Guidelines on Unit Trust Funds in Malaysia, the Capital Markets and Services Act 2007 and other applicable laws during the financial year ended 31 May 2018; Valuation/pricing of units of the Fund has been carried out in accordance with the Deed and relevant regulatory requirements. Creation and cancellation of units have been carried out in accordance with the Deed and relevant regulatory requirements; and Distribution of return by the Fund is relevant and reflects the investment objectives of the Fund. For and on behalf of the Trustee UNIVERSAL TRUSTEE (MALAYSIA) BERHAD ONG TEE VANN Chief Executive Officer Kuala Lumpur, Malaysia 24 July

12 STATEMENT BY THE MANAGER We, CHOO SWEE KEE and MOHAMMED A'REEFF BIN ABDUL KHALID, being two of the Directors of TA INVESTMENT MANAGEMENT BERHAD, do hereby state that, in the opinion of the Manager, the accompanying financial statements set out on pages 16 to 53, are drawn up so as to give a true and fair view of the financial position of TA ISLAMIC FUND as at 31 May 2018 and of its financial performance and cash flows for the financial year ended on that date in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. On behalf of the Manager, CHOO SWEE KEE MOHAMMED A'REEFF BIN ABDUL KHALID Kuala Lumpur, Malaysia 24 July

13 SHARIAH ADVISER'S REPORT FOR THE FINANCIAL YEAR ENDED 31 MAY 2018 TO THE UNITHOLDERS OF TA ISLAMIC FUND We have acted as the Shariah Adviser of TA ISLAMIC FUND ("the Fund"). Our responsibility is to ensure that the procedures and processes employed by TA INVESTMENT MANAGEMENT BERHAD ("the Manager") are in accordance with Shariah principles. In our opinion, the Manager has managed and administered the Fund in accordance with Shariah principles and complied with applicable guidelines, rulings and decisions issued by the Securities Commission pertaining to Shariah matters for the financial year ended 31 May In addition, we also confirm that the investment portfolio of the Fund comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission ("SACSC") and/or the Shariah Supervisory Board of Dow Jones Islamic Market Asia Pacific Index. As for the securities which are not certified by the SACSC and/or the Shariah Supervisory Board of Dow Jones Islamic Market Asia Pacific Index, we have reviewed the said securities and opine that these securities are designated as Shariah-compliant. For and on behalf of the Shariah Adviser IBFIM MUHAMMAD KHAIRULNIZAM BIN ALIAS Consultant (Shariah)/Designated Person Responsible for Shariah Advisory Kuala Lumpur, Malaysia 24 July

14 INDEPENDENT AUDITORS REPORT TO THE UNITHOLDERS OF TA ISLAMIC FUND (Established in Malaysia) Report on the Audit of the Financial Statements Opinion We have audited the financial statements of TA Islamic Fund, which comprise the statement of financial position as at 31 May 2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 16 to 53. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 May 2018, and of its financial performance and its cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. Basis of Opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our auditors report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and Other Ethical Responsibilities We are independent of the Fund and Manager of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By- Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Information Other than the Financial Statements and Auditors Report Thereon The Manager of the Fund is responsible for the other information. The other information comprises the information included in the Fund Annual Report, but does not include the financial statements of the Fund and our auditors report thereon. Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. 13

15 INDEPENDENT AUDITORS REPORT TO THE UNITHOLDERS OF TA ISLAMIC FUND (Established in Malaysia) (continued) Information Other than the Financial Statements and Auditors Report Thereon (Contd.) In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Manager and Trustee for the Financial Statements The Manager of the Fund is responsible for the preparation of financial statements of the Fund that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements of the Fund that are free from material misstatement, whether due to fraud or error. The Trustee is responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of the financial statements. In preparing the financial statements of the Fund, the Manager is responsible for assessing the ability of the Fund to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intend to liquidate the Fund or to cease operations, or have no realistic alternative but to do so. Auditors Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 14

16 INDEPENDENT AUDITORS REPORT TO THE UNITHOLDERS OF TA ISLAMIC FUND (Established in Malaysia) (continued) Auditors Responsibilities for the Audit of the Financial Statements (Contd.) Obtain an understanding of internal control relevant to the audit 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 internal control of the Fund. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Fund to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements of the Fund represent the underlying transactions and events in a manner that gives a true and fair view. We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Other Matter This report is made solely to the unit holders of the Fund, as a body, and for no other purpose. We do not assume responsibility to any other person for the content of this report. KPMG PLT (LLP LCA & AF 0758) Chartered Accountants Chua See Guan Approval Number: 03169/02/2019 J Chartered Accountant 24 July 2018 Petaling Jaya, Selangor 15

17 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 MAY Note RM RM (LOSS)/INCOME Dividend income 1,147,482 1,634,122 Profit income from Islamic deposits 86, ,822 Net unrealised (loss)/gain on foreign exchange (133,053) 310,473 Net (loss)/gain on financial assets at fair value through profit or loss ("FVTPL") 6 (6,188,740) 5,885,085 (5,087,371) 8,000,502 EXPENSES Manager's fee 3 932,901 1,056,579 Trustee's fee 4 49,755 56,351 Auditors' remuneration 9,000 9,000 Tax agent's fee 3,750 3,800 Investment committee's remuneration 7,200 6,800 Shariah Adviser's fee 4,834 4,833 Custodian's fee 4,527 11,155 Brokerage and other transaction fees 341, ,257 Administrative fees and expenses 38,815 37,495 1,391,964 1,696,270 Net (loss)/income before tax (6,479,335) 6,304,232 Less: Income tax expense 5 (7,404) (10,276) Net (loss)/income after tax, representing total comprehensive income for the financial year (6,486,739) 6,293,956 Net (loss)/income after tax is made up of the following: Net realised income 479,180 6,054,976 Net unrealised (loss)/income (6,965,919) 238,980 (6,486,739) 6,293,956 Distribution for the financial year: Net distribution ,812 6,587,714 Gross/Net distribution per unit (sen) The accompanying notes form an integral part of the financial statements. 16

18 STATEMENT OF FINANCIAL POSITION AS AT 31 MAY Note RM RM ASSETS Shariah-compliant investments 6 36,673,250 53,095,379 Islamic deposit with financial institution 7 6,691,141 4,037,109 Dividend receivable 37,468 58,454 Profit receivable Amount due from stockbrokers 9 1,553, ,442 Amount due from the Manager 10 1,700 1,550 Cash at banks 3,056,407 8,210,263 TOTAL ASSETS 48,013,550 66,103,507 LIABILITIES Amount due to stockbrokers 9 499,072 - Amount due to the Manager , ,160 Amount due to Trustee 3,608 4,799 Other payables and accruals 12,500 21,500 Distribution payables ,812 3,897,747 TOTAL LIABILITIES 1,208,697 4,055,206 EQUITY Unitholders' capital 12(a) 51,065,769 59,176,604 Accumulated (losses)/profit 12(b),(c) (4,260,916) 2,871,697 NET ASSET VALUE ("NAV") ATTRIBUTABLE TO UNITHOLDERS 46,804,853 62,048,301 TOTAL EQUITY AND LIABILITIES 48,013,550 66,103,507 NUMBER OF UNITS IN CIRCULATION 12(a) 146,703, ,467,244 NAV PER UNIT The accompanying notes form an integral part of the financial statements. 17

19 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MAY 2018 Accumulated Unitholders' losses capital Note 12(b) Total Note 12(a) and (c) NAV RM RM RM At 1 June ,286,347 3,411,573 66,697,920 Total comprehensive income for the financial year - 6,293,956 6,293,956 Creation of units 786, ,694 Reinvestment of units 2,661,131-2,661,131 Cancellation of units (7,803,686) - (7,803,686) Distribution 246,118 (6,833,832) (6,587,714) At 31 May ,176,604 2,871,697 62,048,301 At 1 June ,176,604 2,871,697 62,048,301 Total comprehensive income for the financial year - (6,486,739) (6,486,739) Creation of units 201, ,647 Reinvestment of units 3,822,783-3,822,783 Cancellation of units (12,194,327) - (12,194,327) Distribution 59,062 (645,874) (586,812) At 31 May ,065,769 (4,260,916) 46,804,853 The accompanying notes form an integral part of the financial statements. 18

20 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MAY RM RM CASH FLOWS FROM OPERATING AND SHARIAH- COMPLIANT INVESTING ACTIVITIES Proceeds from sale of Shariah-compliant investments 50,101,568 64,630,139 Purchases of Shariah-compliant investments (40,354,976) (57,811,329) Dividends received 1,168,468 1,717,400 Profit income received 86, ,228 Manager's fee paid (955,247) (1,056,686) Trustee's fee paid (50,946) (56,357) Tax paid (7,404) (1,145) Payment for other fees and expenses (418,308) (575,039) Net cash generated from operating and Shariah-compliant investing activities 9,570,079 7,018,211 CASH FLOWS FROM FINANCING ACTIVITIES Cash received from units created 201, ,413 Cash paid on units cancelled (12,196,436) (7,813,797) Cash distribution paid (74,964) (28,836) Net cash used in financing activities (12,069,903) (7,053,220) NET DECREASE IN CASH AND CASH EQUIVALENTS (2,499,824) (35,009) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL YEAR 12,247,372 12,282,381 CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 9,747,548 12,247,372 CASH AND CASH EQUIVALENTS COMPRISE: Cash at banks 3,056,407 8,210,263 Islamic deposit with financial institution 6,691,141 4,037,109 Cash and cash equivalents 9,747,548 12,247,372 The accompanying notes form an integral part of the financial statements. 19

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MAY THE FUND, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES TA Islamic Fund ("the Fund") was constituted pursuant to the execution of a Deed of Trust ("the Deed") dated 6 April 2001 and Supplemental Deed dated 28 September 2006 between the Manager, TA Investment Management Berhad, the Trustee, Universal Trustee (Malaysia) Berhad and the registered holders of the Fund. The principal activity of the Fund is to invest in "Authorised Investments" as defined under Clause 1 of the Deed, which include Shariah-compliant stocks and shares of companies quoted on Bursa Malaysia Securities Berhad ("Bursa Malaysia") and short term local Islamic money market investments. The Fund commenced operations on 24 April 2001 and will continue its operations until terminated by the Trustee as provided under Clause 23 of the Deed. The Manager, TA Investment Management Berhad, a company incorporated in Malaysia, is a wholly-owned subsidiary of TA Securities Holdings Berhad. Its ultimate holding company is TA Enterprise Berhad, a company listed on the Main Market of Bursa Malaysia Securities Berhad. Its principal activities are the establishment and management of unit trust funds and fund management. The Manager is licensed to carry out dealing in securities and fund management activities under the Capital Markets and Services Act The financial statements were authorised for issue by the Board of Directors of the Manager in accordance with a resolution on 24 July SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of Preparation (a) Statement of Compliance The financial statements of the Fund have been prepared in accordance with Malaysian Financial Reporting Standards ("MFRS") and International Financial Reporting Standards ("IFRS"), collectively known as the "Standards". The following are accounting standards, amendments and interpretations of the MFRS framework that have been issued by the Malaysian Accounting Standards Board ( MASB ) but have not been adopted by the Fund: MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018 MFRS 9, Financial Instruments (2014) MFRS 15, Revenue from Contracts with Customers Clarifications to MFRS 15, Revenue from Contracts with Customers IC Interpretation 22, Foreign Currency Transactions and Advance Consideration Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual Improvements to MFRS Standards Cycle) Amendments to MFRS 2, Share-based Payment Classification and Measurement of Share-based Payment Transactions Amendments to MFRS 4, Insurance Contracts Applying MFRS 9 Financial Instruments with MFRS 4 Insurance Contracts 20

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.1 Basis of Preparation (contd.) (a) Statement of Compliance (contd.) MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018 (contd.) Amendments to MFRS 128, Investments in Associates and Joint Ventures (Annual Improvements to MFRS Standards Cycle) Amendments to MFRS 140, Investment Property Transfers of Investment Property MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2019 MFRS 16, Leases IC Interpretation 23, Uncertainty over Income Tax Treatments Amendments to MFRS 3, Business Combinations (Annual Improvements to MFRS Standards Cycle) Amendments to MFRS 9, Financial Instruments Prepayment Features with Negative Compensation Amendments to MFRS 11, Joint Arrangements (Annual Improvements to MFRS Standards Cycle) Amendments to MFRS 112, Income Taxes (Annual Improvements to MFRS Standards Cycle) Amendments to MFRS 119, Employee Benefits Plan Amendment, Curtailment or Settlement Amendments to MFRS 123, Borrowing Costs (Annual Improvements to MFRS Standards Cycle) Amendments to MFRS 128, Investments in Associates and Joint Ventures Long-term Interests in Associates and Joint Ventures MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2020 Amendments to MFRS 2, Share-based Payment Amendments to MFRS 3, Business Combinations Amendments to MFRS 6, Exploration for and Evaluation of Mineral Resources Amendment to MFRS 14, Regulatory Deferral Accounts Amendments to MFRS 101, Presentation of Financial Statements Amendments to MFRS 108, Accounting Policies, Changes in Accounting Estimates and Errors Amendments to MFRS 134, Interim Financial Reporting Amendments to MFRS 137, Provision, Contigent Liabilities and Contingent Assets Amendments to MFRS 138, Intangible Assets Amendments to IC Interpretation 12, Service Concession Arrangements Amendments to IC Interpretation 19, Extinguishing Financial Liabilities with Amendments to IC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine Amendments to IC Interpretation 22, Foreign Currency Transactions and Advance Consideration Amendments to IC Interpretation 132, Intangible Assets Web Site Costs 21

23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.1 Basis of Preparation (contd.) (a) Statement of Compliance (contd.) MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2021 MFRS 17, Insurance Contracts MFRSs, Interpretations and amendments effective for annual periods beginning on or after a date yet to be confirmed Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The Fund plans to adopt the abovementioned accounting standards, amendments and interpretations: from the annual period beginning on 1 May 2018 for those accounting standards, amendments and intepretations that are effective for annual periods beginning on or after 1 January 2018 except for Amendments to MFRS 1, Amendments to MFRS 2, Amendments to MFRS 4, Amendments to MFRS 128 and Amendments to MFRS 140 which are not applicable to the Fund; from the annual period beginning on 1 May 2019 for those accounting standard, amendments and intepretations that are effective for annual periods beginning on or after 1 January 2019 except for Amendments to MFRS 11, Amendments to MFRS112, Amendments to MFRS 119, Amendments to MFRS 123 and Amendments to MFRS 128; and from the annual period beginning on 1 April 2020 for those accounting standard, amendments and interpretation that are effective for annual periods beginning on or after 1 January 2020, except for Amendments to MFRS 2, Amendments to MFRS 3, Amendments to MFRS 6, Amendments to MFRS 14 and Amendments to IC Interpretation 20 which are not applicable to the Fund. The Fund does not plan to apply MFRS 17, Insurance Contracts that is effective for annual periods beginning on 1 January 2021 as it is not applicable to the Fund. The initial application of the abovementioned accounting standards, amendments or interpretations are not expected to have any material impacts to the financial statements of the Fund except as mentioned below: MFRS 9: Financial Instruments MFRS 9 replaces the guidance in MFRS 139, Financial Instruments: Recognition and Measurement on the classification and measurement of financial assets and financial liabilities, and on hedge accounting. Currently, the Fund classifies and measures financial assets and liabilities based on the Fund s existing policy (refer to Note 2.2(a) and Note 2.2(d) respectively). 22

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.1 Basis of Preparation (contd.) (a) Statement of Compliance (contd.) MFRS 9: Financial Instruments (contd.) In respect of impairment of financial assets, MFRS 9 replaces the incurred loss model in MFRS 139 with an expected credit loss (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments measured at fair value through other comprehensive income, but not to investments in equity instruments. Estimated impact of the adoption of MFRS 9 The Fund has assessed that the initial application of MFRS 9 on its financial statements for the year ending 30 April 2019 will have no material impact on the net assets and net income of the Fund. (b) Basis of measurement The financial statements of the Fund have been prepared on the historical cost basis, unless otherwise indicated in Note 2.2. (c) Functional and presentation currency The financial statements are presented in Ringgit Malaysia ("RM"), which is the Fund's functional currency. 2.2 Significant Accounting Policies (a) Financial Assets Financial assets are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss ("FVTPL"), directly attributable transaction costs. A financial asset is derecognised when the asset is disposed and the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received is recognised in profit or loss. 23

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.2 Significant Accounting Policies (contd.) (a) Financial Assets (contd.) Financial assets and liabilities are offset and the net amount reported in the financial statements when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Fund determines the classification of its financial assets at initial recognition, and the categories include financial assets at FVTPL and receivables. (i) Financial assets at FVTPL FVTPL category comprises financial assets that are held for trading, including Shariah-compliant derivatives (except for a Shariah-compliant derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial assets that are specifically designated into this category upon initial recognition. Shariah-compliant derivatives that are linked to and must be settled by delivery of unquoted Shariah-compliant equity instruments whose fair values cannot be reliably measured are measured at cost. Other financial assets categorised as FVTPL are subsequently measured at their fair values with the gain or loss recognised in profit or loss. (ii) Receivables Financial assets with fixed or determinable payments that are not quoted in an active market are classified as receivables. The Fund includes short-term receivables in this classification. Subsequent to initial recognition, financial assets categorised as receivables are measured at amortised cost using the effective profit rate method. Gains and losses are recognised in profit or loss when such financial assets are derecognised or impaired, and through the amortisation process. (b) Impairment of Financial Assets All financial assets (except for financial assets categorised as fair value through profit or loss) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. For an investment in an Shariahcompliant equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment. If any such objective evidence exists, then the impairment loss of the financial asset is estimated. 24

26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.2 Significant Accounting Policies (contd.) (b) Impairment of Financial Assets (contd.) An impairment loss in respect of receivables is recognised in profit or loss and is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the asset s original effective profit rate. The carrying amount of the asset is reduced through the use of an allowance account. If, in a subsequent period, the fair value of a sukuk increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss. (c) Classification of Realised and Unrealised Gains and Losses Unrealised gains and losses comprise changes in the fair value of financial instruments for the year and from reversal of prior year's unrealised gains and losses for financial instruments which were realised (i.e. sold, redeemed or matured) during the financial year. The realised gain/(loss) on sale of Shariah-compliant investments is measured as the difference between the net disposal proceeds and the carrying amount of the investments. The carrying amount for determining the realised gain/(loss) on sale of Shariah-compliant investments is based on the weighted average cost method. (d) Financial Liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of MFRS 139, Financial Instruments: Recognition and Measurement are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. The Fund's financial liabilities are recognised initially at fair value plus any directly attributable transaction costs and subsequently measured at amortised cost using the effective profit rate method. A financial liability is derecognised when the obligation under the liability is extinguished. Gains and losses are recognised in profit or loss when the liabilities are derecognised. 25

27 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.2 Significant Accounting Policies (contd.) (e) Foreign Currency Transactions Transactions in foreign currencies are translated to the functional currency of the Fund at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale Shariahcompliant equity instruments or a financial instrument designated as a hedge of currency risk, which are recognised in other comprehensive income. (f) Unitholders Capital The unitholders' capital of the Fund is classified as an equity instrument. Distribution equalisation represents the average distributable amount included in the creation and cancellation prices of units. This amount is either refunded to unitholders by way of distribution and/or adjusted accordingly when units are cancelled. (g) Distribution Distribution is at the discretion of the Fund. A distribution to the Fund's unitholders is accounted for as a deduction from realised reserves except where distribution is sourced out of distribution equalisation which is accounted for as a deduction from unitholders' capital. A proposed distribution is recognised as a liability in the period in which it is approved. (h) Cash and Cash Equivalents Cash and cash equivalents comprise cash at banks and short-term Islamic deposits with financial institutions that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. 26

28 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.2 Significant Accounting Policies (contd.) (i) Income Recognition Income is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable. Dividend income is recognised when the Fund's right to receive payment is established. Profit income is recognised using the effective profit rate method. (j) Income Tax Current tax assets or liabilities position as at reporting date are measured at the net amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the tax expense for the financial year are those that are enacted or substantively enacted by the reporting date. Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Deferred tax is provided for, using the liability method, on taxable temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. (k) Segment Reporting For management purposes, the Fund is managed by two main portfolios, namely Shariah-compliant equity securities and Islamic money market instruments. Each segment engages in separate investing activities and the operating results are regularly reviewed by the Investment Manager and Investment Committee. The Investment Committee assumes the role of chief operating decision maker, for performance assessment purposes and to make decisions about resources allocated to each Shariah-compliant investment segment. (l) Significant Accounting Estimates and Judgments The preparation of the Fund's financial statements requires the Manager to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability in the future. 27