Takaful AlAfdhal Annual Report 2011 Eng · 2011-10-12 · Page | 3 WE CONTINUE TO PROTECT YOU AND...

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CONTENTS

GROUP MANAGING DIRECTOR’S STATEMENT

4

FUND PROFILE

6

FUND PERFORMANCE REVIEW 8

APPENDIX: PERFORMANCE REVIEW OF INDIVIDUAL ASSET CLASS 13

1. EUROPEAN SOVEREIGN FIXED INCOME INDEX 13

2. PRECIOUS METAL INDEX 15

3. COPPER SPOT 17

4. ASIAN BLUE CHIP EQUITY INDEX 19

5. 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 2011

27

STATEMENTS OF INCOME AND EXPENDITURE FOR FINANCIAL YEAR ENDED 19 JUNE 2011

28

STATEMENTS OF CHANGES IN NET ASSET VALUE FOR FINANCIAL YEAR ENDED 19 JUNE 2011

28

STATEMENTS OF CASH FLOWS FOR FINANCIAL YEAR ENDED 19 JUNE 2011

29

NOTES TO FINANCIAL STATEMENTS 30

COMPARATIVE PERFORMANCE TABLE

32

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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 Shariah-

compliant 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 16th

December 2010.

* 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

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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 2011.

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 2011.

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 2011. 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 RM0.941.

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:

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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



% weight in the


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 12.4% (8.5%) 3.9%

60% x 20.6% 40% x (21.2%) 12.4% + (8.5%)

Growth Overweight Portfolio 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 2012. 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 2010. 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 2013. 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

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FUND PROFILE

Takaful myAl-Afdhal is a 5-year closed-ended investment-linked plan that allows participants to invest in a Shariah-

compliant 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 Description

European Sovereign Fixed Income Index An index for sovereign bonds in the Eurozone

Precious Metal Index A commodity index that tracks the performance of gold and silver

Copper Spot Copper Cash Price at a leading metal exchange

Asian Blue Chip Equity Index An index comprising of top 50 Asian Blue-Chip companies

Japanese REITs Index 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



Precious Metal

Index, 75%

European Fixed Income

Index, 25% Copper, 50%

Asian Blue Chip Equity

Index, 25%

Japanese REITs, 25%

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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

Takaful myAl-Afdhal Annual Profit* distribution will be referenced to the best performing portfolio.



Growth Basket, 40%

Defensive Basket, 60%

Growth Basket 60%

Defensive Basket, 40%

P a g e | 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 RM0.941.

0.800

0.850

0.900

0.950

1.000

1.050

1.100

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Takaful myAl-Afdhal NAV per unit Performance

Lowest NAV: 10 Sept 08 RM0.850

Highest NAV: 28 Apr 11 RM1.067

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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



% weight in the


European Sovereign Fixed Income Index 13.9% 25% 20.6% Precious Metal Index 22.8% 75%

Growth Basket



% weight in the


Copper (18.4%) 50% (21.2%)

Asian Blue Chip Index (15.1%) 25%

Japanese REIT Index (32.9%) 25%

Portfolio Performance1

Defensive Basket Growth Basket Performance of

Portfolio

Defensive Overweight Portfolio 12.4% (8.5%) 3.9%

60% x 20.6% 40% x (21.2%) 12.4% + (8.5%)

Growth Overweight Portfolio 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%.

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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.

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

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European Sovereign Fixed Income Index Precious Metal IndexAsian Blue Chip Equity Index Copper SpotJapanese REITs Index

Base 100

Inception

Performance of Underlying Since Inception

P a g e | 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

2010. 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 2011.

P a g e | 12

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

APPENDIX

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APPENDIX

PERFORMANCE REVIEW & OUTLOOK OF INDIVIDUAL ASSET CLASS

1. EUROPEAN SOVEREIGN FIXED INCOME INDEX

Initial Strike (16.06.08)

Quarter 1 (16.09.08)

Quarter 2 (16.12.08)

Quarter 3 (16.03.09)

Quarter 4 (16.06.09)

Quarter 5 (16.09.09)

Quarter 6 (16.12.09)

143.84

149.89 (+4.2%)

156.25 (+8.6%)

157.90 (+9.8%)

158.94 (+10.5%)

164.51 (+14.4%)

166.48 (+15.7%)

Quarter 7 (16.03.09)

Quarter 8 (16.06.10)

Quarter 9 (16.09.10)

Quarter 10 (16.12.10)

Quarter 11 (16.03.11)

Quarter 12 (16.06.11)

Average Return for

12 Quarters

168.59 (+17.2%)

167.75 (+17.3%)

172.05 (+19.6%)

166.66 (+15.9%)

167.81 (+16.7%)

167.76 (+16.6%)

+13.9%

Note : Percentage change of price in value is computed by comparing to the Initial Strike

100.0%

105.0%

110.0%

115.0%

120.0%

125.0%

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(%

)

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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.

P a g e | 15

2. PRECIOUS METAL INDEX


Quarter 1 (16.09.08)

Quarter 2 (16.12.08)

Quarter 3 (16.03.09)

Quarter 4 (16.06.09)

Quarter 5 (16.09.09)

Quarter 6 (16.12.09)

137.08

114.77 (-16.3%)

122.93 (-10.3%)

135.46 (-1.2%)

137.49 (0.3%)

151.96 (+10.9%)

167.27 (+22.0%)

Quarter 7 (16.03.09)

Quarter 8 (16.06.10)

Quarter 9 (16.09.10)

Quarter 10 (16.12.10)

Quarter 11 (16.03.11)

Quarter 12 (16.06.11)

Average Return for

12 Quarters

164.88 (+20.3%)

179.72 (+31.1%)

187.12 (+36.5%)

207.64 (+51.5%)

216.67 (+58.1%)

234.66 (+71.2%)

+22.8%


60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

200.0%

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(%)

P a g e | 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 2011. 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.

P a g e | 17

3. COPPER SPOT


Quarter 1 (16.09.08)

Quarter 2 (16.12.08)

Quarter 3 (16.03.09)

Quarter 4 (16.06.09)

Quarter 5 (16.09.09)

Quarter 6 (16.12.09)

8,255.00

6,841.00 (-17.1%)

3,020.50 (-63.4%)

3,690.00 (-55.3%)

5049.00 (-38.8%)

6,315.50 (-23.5%)

6,946.00 (-15.9%)

Quarter 7 (16.03.09)

Quarter 8 (16.06.10)

Quarter 9 (16.09.10)

Quarter 10 (16.12.10)

Quarter 11 (16.03.11)

Quarter 12 (16.06.11)

Average Return for

12 Quarters

7,341.50 (-11.2%)

6,592.50 (-20.1%)

7,670.00 (-7.1%)

9,050.00 (+9.6%)

9,354.50 (+13.3%)

9,011.5 (+9.2%)

-18.4%


20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

16-J

un-0

8

16-J

ul-0

8

16-A

ug-0

8

16-S

ep-0

8

16-O

ct-0

8

16-N

ov-0

8

16-D

ec-0

8

16-J

an-0

9

16-F

eb-0

9

16-M

ar-0

9

16-A

pr-0

9

16-M

ay-0

9

16-J

un-0

9

16-J

ul-0

9

16-A

ug-0

9

16-S

ep-0

9

16-O

ct-0

9

16-N

ov-0

9

16-D

ec-0

9

16-J

an-1

0

16-F

eb-1

0

16-M

ar-1

0

16-A

pr-1

0

16-M

ay-1

0

16-J

un-1

0

16-J

ul-1

0

16-A

ug-1

0

16-S

ep-1

0

16-O

ct-1

0

16-N

ov-1

0

16-D

ec-1

0

16-J

an-1

1

16-F

eb-1

1

16-M

ar-1

1

16-A

pr-1

1

16-M

ay-1

1

16-J

un-1

1

Cha

nge

in in

vest

men

t v

alue

s (%

)

P a g e | 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.

P a g e | 19

4. ASIAN BLUE CHIP EQUITY INDEX


Quarter 1 (16.09.08)

Quarter 2 (16.12.08)

Quarter 3 (16.03.09)

Quarter 4 (16.06.09)

Quarter 5 (16.09.09)

Quarter 6 (16.12.09)

480.91

372.24 (-22.6%)

292.10 (-39.3%)

255.75 (-46.8%)

356.03 (-26.0%)

430.22 (-10.5%)

438.74 (-8.8%)

Quarter 7 (16.03.09)

Quarter 8 (16.06.10)

Quarter 9 (16.09.10)

Quarter 10 (16.12.10)

Quarter 11 (16.03.11)

Quarter 12 (16.06.11)

Average Return for

12 Quarters

429.13 (-10.8%)

413.99 (-13.9%)

445.42 (-7.4%)

485.45 (+0.9%)

490.73 (+2.0%)

492.86 (+2.5%)

-15.1%


40.0%

60.0%

80.0%

100.0%

120.0%

16-J

un-0

8

16-J

ul-0

8

16-A

ug-0

8

16-S

ep-0

8

16-O

ct-0

8

16-N

ov-

08

16-D

ec-0

8

16-J

an-0

9

16-F

eb-0

9

16-M

ar-0

9

16-A

pr-

09

16-M

ay-0

9

16-J

un-0

9

16-J

ul-0

9

16-A

ug-0

9

16-S

ep-0

9

16-O

ct-0

9

16-N

ov-

09

16-D

ec-0

9

16-J

an-1

0

16-F

eb-1

0

16-M

ar-1

0

16-A

pr-

10

16-M

ay-1

0

16-J

un-1

0

16-J

ul-1

0

16-A

ug-1

0

16-S

ep-1

0

16-O

ct-1

0

16-N

ov-

10

16-D

ec-1

0

16-J

an-1

1

16-F

eb-1

1

16-M

ar-1

1

16-A

pr-

11

16-M

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1

16-J

un-1

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Cha

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P a g e | 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 2010.

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 2011. 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.

P a g e | 21

5. JAPANESE REITs INDEX


Quarter 1 (16.09.08)

Quarter 2 (16.12.08)

Quarter 3 (16.03.09)

Quarter 4 (16.06.09)

Quarter 5 (16.09.09)

Quarter 6 (16.12.09)

1424.31

1177.84 (-17.3%)

901.18 (-36.7%)

782.05 (-45.1%)

884.57 (-37.9%)

1002.96 (-29.6%)

866.54 (-39.2%)

Quarter 7 (16.03.09)

Quarter 8 (16.06.10)

Quarter 9 (16.09.10)

Quarter 10 (16.12.10)

Quarter 11 (16.03.11)

Quarter 12 (16.06.11)

Average Return for

12 Quarters

927.16 (-34.9%)

915.32 (-35.7%)

904.10 (-36.5%)

1,094.42 (-23.2%)

985.90 (-30.8%)

1,030.79 (-27.6%)

-32.9%


40.0%

60.0%

80.0%

100.0%

120.0%

16-J

un-0

8

16-J

ul-0

8

16-A

ug-0

8

16-S

ep-0

8

16-O

ct-0

8

16-N

ov-0

8

16-D

ec-0

8

16-J

an-0

9

16-F

eb-0

9

16-M

ar-0

9

16-A

pr-0

9

16-M

ay-0

9

16-J

un-0

9

16-J

ul-0

9

16-A

ug-0

9

16-S

ep-0

9

16-O

ct-0

9

16-N

ov-0

9

16-D

ec-0

9

16-J

an-1

0

16-F

eb-1

0

16-M

ar-1

0

16-A

pr-1

0

16-M

ay-1

0

16-J

un-1

0

16-J

ul-1

0

16-A

ug-1

0

16-S

ep-1

0

16-O

ct-1

0

16-N

ov-1

0

16-D

ec-1

0

16-J

an-1

1

16-F

eb-1

1

16-M

ar-1

1

16-A

pr-1

1

16-M

ay-1

1

16-J

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1

Cha

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men

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ues

(%)

P a g e | 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 2011. 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% year-

on-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.

P a g e | 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.

P a g e | 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

P a g e | 25

REPORT OF THE AUDITORS to the unitholders of the Takaful Malaysia’s Al-Afdhal Investment-Linked Fund (Company No. 131646-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.

P a g e | 26

Company No. 131646-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

P a g e | 27

STATEMENT OF ASSETS AND LIABILITIES AS AT 19 JUNE 2011

2011 2010 Note RM RM

ASSETS

Shariah compliant structured investment 2

71,927,419 83,499,927

71,927,419 83,499,927

CURRENT LIABILITIES

Provision for deferred tax

8,971 -

Other liabilities

448,451 839,642

457,422 839,642

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

1.054 0.941

P a g e | 28

STATEMENT OF CHANGES IN NET ASSET VALUE FOR FINANCIAL YEAR ENDED 19 JUNE 2011

STATEMENT OF INCOME AND EXPENDITURE FOR FINANCIAL YEAR ENDED 19 JUNE 2011

2011 2010 Note RM RM

Income Fair value gain on investment 8,658,127 5,052,135 Other income 3 787,595 817,933

Total income 9,445,722 5,870,068

Outgo

Investment management fees 448,451 787,595

Total outgo 448,451 787,595

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

2011 2010 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

P a g e | 29

STATEMENT OF CASH FLOWS FOR FINANCIAL YEAR ENDED 19 JUNE 2011

2011 2010 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 10,280,415Increase 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 - -

P a g e | 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: 26th Floor, Annex Block Dataran Kewangan Darul Takaful No.4, Jalan Sultan Sulaiman 50000 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 2011. 1. 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.

P a g e | 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 19.6. 2011

Cost 57,248,434 8,166,718 65,415,152

Unrealised fair value gain 5,699,246 813,021 6,512,267

Fair value 62,947,680 8,979,739 71,927,419

19.6. 2010

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 83,499,927

3. 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.

P a g e | 32

COMPARATIVE PERFORMANCE TABLE The performance data since inception is as follows:

201119-Jun-11

2010 19-Jun-10

200919-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* 0.941 0.904

Highest NAV per unit (RM) 1.067 0.972 0.965

Lowest NAV per unit (RM) 0.940 0.878 0.850

Total Annual Return (% p.a)

a) Capital Growth (inclusive income distribution) 12.06 4.05 (6.29)

b) Income Distributions 3.00 Nil Nil

Average Annual Return (%)

One-Year 12.06 4.05 (6.29) Three-Year

3.27

* NAV per unit is before income distribution

P a g e | 33

Takaful AlAfdhal Annual Report 2011 Eng · 2011-10-12 · Page | 3 WE CONTINUE TO PROTECT YOU AND...

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