1 General Information 1. 2 Manager s Report 3. 3 Policy On Stockbroking Rebates And Soft Commissions 8. 4 Statement By The Manager 9

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2 CONTENTS PAGE 1 General Information 1 2 Manager s Report 3 3 Policy On Stockbroking Rebates And Soft Commissions 8 4 Statement By The Manager 9 5 Trustee s Report 10 6 Shariah Adviser s Report 11 7 Statement Of Comprehensive Income 12 8 Statement Of Financial Position 13 9 Statement Of Changes In Equity Statement Of Cash Flows Summary Of Significant Accounting Policies Notes To The Financial Statements Corporate Information 35 i

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4 MANULIFE 1 GENERAL INFORMATION 1.1 THE TRUST The Fund commenced operations on 17 June 2013 and will continue its operations until terminated as provided under Clause 12 of the Deed. 1.2 FUND TYPE / CATEGORY Income and Growth / Sukuk 1.3 OBJECTIVE OF THE FUND The Fund seeks to maximise return through a combination of income* and capital appreciation over the medium- to long-term by investing primarily in sukuk. *Note: Income distribution (if any) may be made in the form of cash or additional units reinvested to the Fund. Any material change to the Fund s investment objective would require the Unit Holders approval. 1.4 DISTRIBUTION POLICY The Fund intends to distribute income, if any, on an annual basis. 1.5 PERFORMANCE BENCHMARK CIMB Bank 12-month FRIA-i Fixed Maturity Rate. 1.6 INVESTMENT STYLE AND STRATEGY The Fund aims to achieve its objective by investing a minimum of 70% up to a maximum of 98% of its NAV in local sukuk which include but are not limited to sovereign sukuk (including quasi-sovereign) and corporate sukuk (listed and unlisted). Investment in the aforesaid sukuk is expected to generate income through regular profit payments. The Fund will invest in investment-grade sukuk with a credit rating of at least BBB-/P3 by RAM or its equivalent rating by MARC. The balance of the Fund s NAV will be invested in Islamic money market instruments or placed in Islamic deposits. The Manager will actively manage the tenure of the sukuk that the Fund invests in. The trading strategies adopted by the Manager will depend on market opportunities and interest rate expectations, that is expectations on direction of interest rate movements will influence the tenure of the sukuk taken by the Manager. Hence, capital appreciation of the Fund may be achieved as the Manager may dispose of sukuk which have appreciated in value, prior to its maturity. The Manager will adopt both the bottom-up and top-down approach to maximise the potential returns of the Fund, with particular emphasis on fundamental analysis. From a top-down perspective, the Manager analyses the general economic and market conditions to form an overall view on the economy, interest rate outlook, market opportunities and risks involved. This view will be taken into consideration when formulating the overall investment strategy of the Fund. From a bottom-up perspective, the selected sukuk will undergo a credit evaluation process that entails an assessment of the credit risk factor of the sovereign and corporate issuer and the structure of the sukuk, while also considering the liquidity and yield of the sukuk relative to other comparable sukuk. 1

5 The Manager may also invest in Shariah-compliant collective investment schemes provided it is consistent with the Fund s investment objective. The Manager will ensure there is sufficient liquidity to meet redemption requests. Temporary defensive measures As a temporary defensive measure, the Manager may lower the Fund s sukuk exposure to below the minimum 70% (of the Fund s NAV) limit if the Manager is of the opinion that the investment climate is deemed to be unfavourable or under adverse market conditions. The Manager will then decide on the next best appropriate asset allocation strategy and reallocate the Fund s sukuk investment into more defensive investments such as Islamic money market instruments and/or placement in Islamic deposits. During the six months financial period under review, active management of the portfolio was adopted depending on the market conditions, interest rate expectations and credit conditions. 2

6 2 MANAGER S REPORT 2.1 FUND PERFORMANCE MANULIFE For the financial period ended 31 October 2017, the Fund s return increased by 2.03%. The Fund outperformed its benchmark return which increased by 1.55%. The outperformance was due to the combination of income return and capital gains from its Sukuk holdings. The graph below compares the 6-month performance of the Fund against its benchmark return: 2.5% 2.0% 1.5% 1.0% 0.5% 0% Apr 17 Fund Performance vs. Benchmark Index Return May 17 Jun 17 Jul 17 Manulife Shariah-Dana Sukuk Return Source: Lipper & CIMB Website Fund Size Aug 17 Sep 17 Oct 17 Benchmark Index Return The Fund s total NAV decreased to RM50.93mil from RM56.71mil during the six months financial period under review. Fund s Returns (a) The graph below compares the since commencement date performance of the Fund against its benchmark return Fund Performance vs. Benchmark Index Return 16% 14% 12% 10% 8% 6% 4% 2% -2% 0% Jun 13 Oct 13 Feb 14 Jun 14 Oct 14 Feb 15 Jun 15 Oct 15 Manulife Shariah-Dana Sukuk Return Source: Lipper & CIMB Website Feb 16 Jun 16 Oct 16 Feb 17 Jun 17 Oct 17 Benchmark Index Return 3

7 (b) Average Total Return of the Fund: For the financial period ended 31 October 2017 Fund (% p.a.) Benchmark (% p.a.) 1 year years Since Commencement Commencement date: 17 June 2013 Source: Lipper & CIMB Website (c) Annual Total Return of the Fund: For the financial period ended: Fund (% p.a.) Benchmark (% p.a.) 31 October October October October Since commencement to 31 October Commencement date: 17 June 2013 Source: Lipper & CIMB Website Note:- The benchmark was changed from MBB 12-month GIA Rate to CIMB 12-month FRIA-i Fixed Maturity Rate effective 29 December 2016 retrospectively. BASES OF CALCULATION 1. Net Asset Value (NAV) Net Asset Value of the Fund is determined by deducting the value of all the Fund s liabilities from the value of all the Fund s assets, at the valuation point. 2. Net Asset Value per unit Net Asset Value per unit is the net asset value of the Fund divided by the total number of units in circulation, at the valuation point. 3. Fund s Return Fund s return can be calculated based on the computation methods as follows: Daily Total Fund s Return = {[End NAV (Ex-distribution) - Beginning NAV + Dividend Distribution] / Beginning NAV} x 100% Total Fund s Return Average Total Return = Total Fund s return for the period is derived from geometrically linking together the daily total fund s returns. The linking formula is = [(1+ R 1 ) x (1+ R 2 ) x (1+ R n )] -1 where: R 1 is the first daily return for the period, R 2 is the second daily return for the period, and R n is the last daily return for the period. = Annualised Total Return (Actual number of days in a year/ [(1+ Total fund s return for the period) number of days during the period) -1] x 100% 4

8 The following table shows other financial and performance data of the Fund for the past three financial periods: Fund Data 31 October October October 2015 NAV (RM) 50,927,417 52,890,920 49,210,958 Units in Circulation ( 000) 93,974 97,654 93,314 NAV (RM per unit) Highest / Lowest NAV (RM per unit) Total Fund Return (%) NAV Return (%) Income Return (%) / / / Management Expenses Ratio (%) Portfolio Turnover (times) NOTES (i) Management Expenses Ratio (MER) MER can be calculated based on the ratio of the sum of fees and the recovered expenses of the unit trust fund to the average value of the unit trust fund calculated on a daily basis. Fees of the unit trust fund + Recovered expenses of the unit trust fund Average value of the unit trust fund calculated on a daily basis x 100 Where: Fees Recovered expenses Average value of the unit trust fund = All ongoing fees deducted / deductible directly from the unit trust fund in respect of the period covered by the management expense ratio, expressed as a fixed amount, calculated on a daily basis. This would include the annual management fee, the annual trustee fee and any other fees deducted / deductible directly from the unit trust fund; = All expenses recovered from/ charged to the unit trust fund, as a result of the expenses incurred by the operation of the unit trust fund, expressed as a fixed amount. This should not include expenses that would otherwise be incurred by an individual investor (e.g. brokerage, taxes and levies); and = The NAV of the unit trust fund, including unit trust net income value of the fund, less expenses on an accrued basis, in respect of the period covered by the management expense ratio, calculated on a daily basis. The MER for the financial period is remains consistent with previous financial period. 5

9 (ii) Portfolio Turnover Ratio (PTR) PTR can be calculated based on the ratio of the average sum of acquisitions and disposals of the Shariah-compliant unit trust fund for the year to the average value of the unit trust fund for the year calculated on a daily basis [Total acquisitions of the fund for the year + Total disposals of the fund for the year]/2 Average value of the unit trust fund calculated on a daily basis The PTR for the financial period is higher than the previous financial period mainly due to the increase in average trading activities. The Manager wishes to highlight that past performance of the Fund is not an indication of future performance. The price of units and the investment returns may go down, as well as up. 2.2 Asset Allocation Asset allocation for the past three financial periods: Sector Allocation 31 October 2017 % of Net Asset Value 31 October October 2015 Unquoted sukuk Total Shariah-compliant Investments Islamic Deposits With Licensed Financial Institutions Other Assets & Liabilities (0.01) As at 31 October 2017, the Fund was 91.82% invested in sukuk. Another 8.15% of the Fund was placed as Islamic deposits with licensed financial institutions. 2.3 MARKET REVIEW During the six months financial period under review (1st May 2017 to 31st October 2017), US Treasuries (UST) yield curve bear flattened. The rise in short-term yield was not a surprise given the widely-anticipated rate hikes path by the US Federal Reserve s (Fed) in 4Q 2017 and Nevertheless, long-term yields did not increase much as the movements were neutralised by geopolitical risks and mixed macroeconomics data coming out from the US. In Malaysia, the Malaysian Government Securities (MGS) yield curve flattened. The yield curve tracked the global bond yield curves and UST yield curve due to lack of any internal factors. The foreign flows activities could be seen as MYR movement has stabilised after the implementation of Bank Negara Malaysia (BNM) policy. On the corporate front, MYR-denominated corporate bonds yields generally tracked the direction of MGS during the period. Bargain-hunting activities could be seen in the secondary market while the primary market issuances were well supported by local investors. 6

10 2.4 MARKET OUTLOOK AND INVESTMENT STRATEGY MANULIFE We expect healthy global economic growth going into 2018, with expectations of gradual tightening of monetary policies across most major economies. Given stable economic condition and expectations of unchanged policy rates in Malaysia for the rest of 2017, the local market is more likely to be affected by exogenous factors and should track global bond movements. BNM has signalled that it is getting ready to normalise interest rates should domestic demand growth pan out as expected. However, our view is that the interest rate hike would be at a measured pace if any, depending on the local macro growth and core Consumer Price Index (CPI) data as well as other external factors. Risks to our outlook and expectations come in the form of geopolitical and events risk, which include tensions involving North Korea as well as fiscal policies in the US. 2.5 BREAKDOWN OF UNIT HOLDINGS BY SIZE AS AT 31 OCTOBER 2017 The following table presents the distribution of the Fund s unit holders according to size of unit holdings: Size of Holdings No. of Unit Holders % No. of Units Held ( 000) % 5,000 and below ,001 to 10, ,001 to 50, ,001 to 500, Above 500, , Manager s stock Total ,

11 3 POLICY ON STOCKBROKING REBATES AND SOFT COMMISSIONS The Management Company did not retain any rebates. For the six months financial period ended 31 October 2017, the Management Company or its Fund Manager did not receive any rebates or soft commissions. 8

12 4 STATEMENT BY THE MANAGER MANULIFE We, Chong Soon Min and Wong Boon Choy, being two of the Directors of Manulife Asset Management Services Berhad ( the Manager ), do hereby state that, in the opinion of the Manager, the unaudited financial statements comprising the statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, summary of significant accounting policies and notes to the financial statements, are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 October 2017 and of its financial performance, changes in equity and cash flows of the Fund for the six months financial period ended 31 October 2017 in accordance with the Malaysian Financial Reporting Standards ( MFRS ) and the International Financial Reporting Standards ( IFRS ). For and on behalf of the Manager MANULIFE ASSET MANAGEMENT SERVICES BERHAD CHONG SOON MIN Director WONG BOON CHOY Director Kuala Lumpur 18 December

13 5 TRUSTEE S REPORT TO THE UNIT HOLDERS OF MANULIFE We, CIMB Islamic Trustee Berhad being the trustee for Manulife Shariah - Dana Sukuk ( the Fund ), are of the opinion that Manulife Asset Management Services Berhad ( the Manager ), acting in the capacity as Manager of the Fund, has fulfilled its duties in the following manner for the six months financial period ended 31 October a) The Fund has been managed in accordance with the limitations imposed on the investment powers of the Manager under the Deed, the Securities Commission Malaysia s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 (as amended from time to time) and other applicable laws; b) Valuation and pricing for the Fund has been carried out in accordance with the Deed and relevant regulatory requirements; and c) Creation and cancellation of units have been carried out in accordance with the Deed and relevant regulatory requirements. For and on behalf of CIMB Islamic Trustee Berhad Lee Kooi Yoke Chief Operating Officer Kuala Lumpur, Malaysia 18 December

14 6 SHARIAH ADVISER S REPORT TO THE UNIT HOLDERS OF MANULIFE MANULIFE We have acted as the Shariah Adviser of Manulife Shariah - Dana Sukuk. Our responsibility is to ensure that the procedures and processes employed by Manulife Asset Management Services Berhad are in accordance with Shariah principles. In our opinion, Manulife Asset Management Services Berhad has managed and administered Manulife Shariah - Dana Sukuk in accordance with Shariah principles and complied with applicable guidelines, rulings and decisions issued by the Securities Commission pertaining to Shariah matters for the six months financial period ended 31 October In addition, we also confirm that the investment portfolio of Manulife Shariah - Dana Sukuk comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission ( SACSC ). As for the securities which are not certified by the SACSC, we have reviewed the said securities and opined that these securities are designated as Shariah-compliant. For and on behalf of the Shariah Adviser IBFIM DR. AHMAD ZAKIRULLAH BIN MOHAMED SHAARANI Managing Advisor (Shariah)/Designated Person Responsible for Shariah Advisory Kuala Lumpur 18 December

15 7 STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2017 INVESTMENT INCOME Note Profit income 1,222,704 1,268,250 Net gain on financial assets at fair value through profit or loss 6 135, ,211 RM RM 1,358,532 1,901,461 EXPENSES Manager s fee 3 221, ,839 Trustee s fee 4 11,071 10,442 Auditors remuneration 3,025 4,016 Tax agent s fee 1,361 1,358 Other expenses 16,590 16, , ,934 PROFIT BEFORE TAXATION 1,105,069 1,660,527 TAXATION PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME 1,105,069 1,660,527 Profit after taxation is made up as follows: Realised 937, ,270 Unrealised 167, ,257 1,105,069 1,660,527 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 12

16 8 STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2017 ASSETS Note RM RM Financial assets at fair value through profit or loss 6 46,758,373 51,403,183 Amount due from Manager 10,836 - Cash and cash equivalents 7 4,216,374 1,576,894 TOTAL ASSETS 50,985,583 52,980,077 LIABILITIES Amount due to Manager - Manager s fee 36,301 68,389 Amount due to Trustee 1,815 1,793 Other payables 8 20,050 18,975 TOTAL LIABILITIES 58,166 89,157 NET ASSETS VALUE ( NAV ) OF THE FUND 50,927,417 52,890,920 EQUITY Unit holders capital 46,883,811 48,910,660 Retained earnings 4,043,606 3,980,260 50,927,417 52,890,920 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 2 50,927,417 52,890,920 NUMBER OF UNITS IN CIRCULATION 10 93,973,742 97,653,742 NAV PER UNIT The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 13

17 9 STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2017 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 MAY ,771,654 2,938,537 56,710,191 Movement in unit holders contribution: Creation of units 603, ,408 Cancellation of units (7,491,251) - (7,491,251) Total comprehensive income - 1,105,069 1,105,069 BALANCE AS AT 31 OCTOBER ,883,811 4,043,606 50,927,417 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 MAY ,164,930 2,319,733 50,484,663 Movement in unit holders contribution: Creation of units 2,556,216-2,556,216 Cancellation of units (1,810,486) - (1,810,486) Total comprehensive income - 1,660,527 1,660,527 BALANCE AS AT 31 OCTOBER ,910,660 3,980,260 52,890,920 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 14

18 10 STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2017 CASH FLOWS FROM OPERATING ACTIVITIES Note Purchase of Shariah-compliant investments (17,454,582) (13,830,609) Sale of Shariah-compliant investments 24,874,568 7,844,697 Profit income received 1,222,704 1,268,249 Other income received - (58,898) Manager s fee paid (222,462) (205,998) Trustee s fee paid (11,123) (10,300) Audit fee paid (6,000) (6,000) Payment for other fees and expenses (16,175) (16,659) Net cash generated from/(used in) operating activities 8,386,930 (5,015,518) RM RM CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 646,483 2,567,216 Payments for cancellation of units (7,645,270) (1,821,486) Net cash (used in)/generated from financing activities (6,998,787) 745,730 Net increase/(decrease) in cash a nd cash equivalents 1,388,143 (4,269,788) Cash and cash equivalents at beginning of the financial period 2,828,231 5,846,682 Cash and cash equivalents at end of the financial period 7 4,216,374 1,576,894 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 15

19 11 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER 2017 The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. The policies have been consistently applied to all the financial years presented, unless otherwise stated. A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The unaudited financial statements of the Fund have been prepared in accordance with the Malaysian Financial Reporting Standards ( MFRS ) and the International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. The preparation of financial statements in conformity with MFRS and IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires the Manager to exercise judgement in the process of applying the Fund s accounting policies. Although these estimates and judgement are based on the Manager s best knowledge of current events and actions, actual results may differ. There are no significant areas of judgement or complexity that have significant effect on the amounts recognised in the financial statements. There are no critical accounting estimates and assumptions used in the preparation of the financial statements of the Fund for the six months financial period ended 31 October The Fund has applied the following amendments for the first time for the financial year beginning 1 November 2016: Amendments to MFRS 101 Presentation of financial statements - Disclosure initiative Amendments to MFRS 10, 12 & 128 Investment entities - Applying the consolidation exception Annual improvements to MFRSs Cycle There were no significant impact to other accounting policies of the Fund as a result of the above mentioned. The following are standards, amendments to published standards and interpretations to the existing standards that are applicable to the Fund but not yet effective and have not been early adopted by the Fund. Financial year beginning on/after 1 November 2017 Amendments to MFRS 107 Statement of Cash Flows - Disclosure Initiatives (effective from 1 January 2017) introduce an additional disclosure in changes in liabilities arising from financing activities. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund's financial statements. Financial year beginning on/after 1 November 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. 16

20 MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investment in equity¹ instruments is always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument² is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest³. For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded Shariahcompliant derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in OCI rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit losses model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund will apply the standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. B (i) FINANCIAL ASSETS AND FINANCIAL LIABILITIES Classification The Fund classifies its financial assets in the following categories: at fair value through profit or loss and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial assets at fair value through profit or loss Financial assets are designated at fair value through profit or loss when they are managed principally for the purpose of selling or repurchasing in the near term and their performance evaluate on a fair value basis. The Fund designates its investment in unquoted sukuk as financial assets at fair value through profit or loss at inception. Receivables Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as noncurrent assets. The Fund s receivables comprise amount due from Manager and cash and cash equivalents in the statement of financial position. Other financial liabilities The Fund classifies amount due to Manager, amount due to Trustee and other payables as other financial liabilities. 1 For the purposes of the investments made by the Fund, equity instruments and derivatives refers to Shariah-compliant equity instruments and Shariah-compliant derivatives. 2 For the purposes of the investments made by the Fund, debt instruments refers to sukuk. 3 For the purposes of this Fund, interest refers to profits earned from Shariah-compliant investments. 17

21 (ii) Recognition and initial measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Fund commits to purchase or sell the assets. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in profit or loss. Receivables are initially recognised at fair value plus transaction costs. Financial liabilities, within the scope of MFRS 139, 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. (iii) Subsequent measurement - gains and losses Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are included in the profit or loss in the financial period which they arise. Receivables are subsequently carried at amortised cost using the effective profit rate method. (iv) Subsequent measurement - impairment of financial assets The Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Fund uses to determine that there is objective evidence of an impairment loss include indications that the obligor is experiencing significant financial difficulty, high probability that the obligor will enter bankruptcy or other distressed financial reorganisation and events that would adversely affect the financial capability of the obligor. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective profit rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If receivables has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment is recognised (such as an improvement in the debtor s/issuer s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. 18

22 (v) De-recognition Financial assets are de-recognised when the rights to receive cash flows from the Shariahcompliant investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are de-recognised when they are extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or has expired. C CREATION AND CANCELLATION OF UNITS The Fund issues cancellable units, which are cancelled at the unit holder s option and are classified as equity. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s net asset value. The outstanding unit is carried at the redemption amount that is payable at the date of the statement of financial position if the unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at the unit holder s option at prices based on the Fund s net asset value per unit at the time of creation and cancellation. The Fund s net asset value is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. The net asset value per unit is computed each dealing day. The price at which units are created or cancelled is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day. Units in the Fund are classified as equity in the statement of financial position and are stated at fair value representing the price at which unit holders can redeem the units from the Fund. D INCOME RECOGNITION Profit income from Islamic deposits placed with licensed financial instituitions is recognised on an accrual basis using the effective profit rate method. Realised gains or losses on sale/redemption of unquoted sukuk are calculated based on the difference between the net disposal proceeds and carrying amount of unquoted sukuk, determined on cost adjusted for accreation of discount or amortisation of premium. E EXPENSES Expenses are accounted for on an accrual basis and charged to the statement of comprehensive income. F CASH AND CASH EQUIVALENTS For the purpose of statement of cash flows, cash and cash equivalents comprise cash at bank and Islamic deposits held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. G FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The information presented herein represents the estimates of fair values as at the date of statement of financial position. 19

23 Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates. A range of methodologies and assumptions has been used in deriving the fair values of the Fund s financial instruments as at the date of statement of financial position. The total fair value of each financial instrument is not materially different from the total carrying value. The fair values are based on the following methodologies and assumptions: (a) Short-term Islamic deposits with licensed financial institutions For Islamic deposits and placements with licensed financial institutions with maturities of less than three months, the carrying value is a reasonable estimate of fair value. For Islamic deposits and placements with maturities of three months and above, the estimated fair value is based on discounted cash flows using prevailing Islamic interbank money market rates at which similar Islamic deposits and placements would be made with financial institutions of similar credit risk and remaining period to maturity. (b) Unquoted sukuk The estimated fair value is based on price quoted by a Bond Pricing Agency ( BPA ) registered with the Securities Commission. Where such a quotation is not available or where the Manager is of the view that the price quoted by the BPA for a specific unquoted sukuk differs from the market price by more than 20 basis points, the Manager may use the market price, provided that the Manager: (i) (ii) (iii) (c) records its basis for using non-bpa price; obtains necessary internal approvals to use the non-bpa price; and keeps an audit trail of all decisions and basis for adopting the market yield. Other short-term financial instruments Other short-term financial instruments comprise amount due from/to Manager, amount due to Trustee and other payables. The carrying values of the assets and liabilities are assumed to approximate their fair values due to the short tenure of less than one year. H TAXATION Current tax expense is determined according to the tax laws in the jurisdictions of the taxable profit earned during the period from the financial assets in which the Fund invests and includes all taxes based upon the taxable profit. I SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the strategic asset allocation committee of the Manager that makes the strategic decisions. 20

24 12 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 OCTOBER INFORMATION ON THE FUND Manulife Shariah-Dana Sukuk ( the Fund ) was established pursuant to a Master Deed dated 4 March 2013, as amended and supplemented by subsequent Supplemental Deeds (hereinafter referred to as the Deed ) between Manulife Asset Management Services Berhad ( the Manager ) and CIMB Islamic Trustee Berhad ( the Trustee ). The principal activity of the Fund is to invest in Investments as defined under Clause 1 of the Deed, which includes listed and unlisted sukuk traded on Eligible Markets, sovereign sukuk, government investment issues, Islamic accepted bills, Bank Negara notes-i and any other Islamic issues approved/guaranteed by the Malaysian government, Bank Negara Malaysia or other Malaysian government-related agencies, Islamic deposits and Islamic money market instruments with financial institutions, Shariah-compliant collective investment schemes, and any other form of Shariah-compliant investments as may be agreed upon by the Manager and the Trustee from time to time. The Fund commenced operations on 17 June 2013 and will continue its operations until terminated as provided under Clause 12 of the Deed. The main objective of the Fund is to maximise return through a combination of income and capital appreciation over the medium- to long-term by investing primarily in sukuk. The Manager of the Fund, a company incorporated in Malaysia, is a wholly-owned subsidiary of Manulife Holdings Berhad, a public limited liability company, incorporated and domiciled in Malaysia, and listed on the main market of Bursa Malaysia. Its principal activities are the management of unit trusts, private retirement schemes, fund management activities and financial planning. The financial statements were authorised for issue by the Board of Directors of the Manager in accordance with a resolution of the Directors on 18 December NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS The net assets attributable to unit holders meet the definition of puttable instruments classified as equity instruments under the revised MFRS 132, Financial Instruments: Presentation. The units in the Fund are puttable instruments which entitle the unit holders to a pro-rata share of the net assets of the Fund. The units are subordinated and have identical features. There is no contractual obligation to deliver cash or another financial asset other than the obligation on the Fund to repurchase the units. The total expected cash flows from the units in the Fund over the life of the units are based on the change in the net assets of the Fund. 3 MANAGER S FEE In accordance with the Deed, the Manager is entitled to Manager s fee at a rate of 0.80% per annum of the net asset value of the Fund before deducting Trustee s fee and Manager s fee for the day, calculated on a daily basis. There will be no further liability to the Manager in respect of Manager s fee other than the amount recognised above. 4 TRUSTEE S FEE In accordance with the Deed, the Trustee is entitled to a fee of 0.04% per annum of the net asset value of the Fund before deducting Trustee s fee and Manager s fee for the day, calculated on a daily basis. There will be no further liability to the Trustee in respect of Trustee s fee other than the amount recognised above. 21

25 5 TAXATION RM RM Current taxation - - Numerical reconciliation between profit before taxation multiplied by the Malaysian statutory tax rate and tax expenses of the Fund is as follows: RM RM Profit before taxation 1,105,069 1,660,527 Tax calculated at Malaysian tax rate of 24% (2016: 24%) 265, ,526 Tax effect in respect of: - Expenses not deductible for tax purposes 6,965 6,377 - Restriction on tax deductible expenses for unit trust funds 53,866 51,447 - Investment income not subject to tax (326,048) (456,350) Tax expenses FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS RM RM Designated at fair value through profit or loss - Unquoted sukuk 46,758,373 51,403,183 Net gain on financial assets at fair value through profit or loss Realised (31,728) (51,046) - Unrealised 167, ,257 RM RM 135, ,211 22

26 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) UNQUOTED SUKUK Nominal value Carrying value Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Bumitama Agri Limited % / ,750,000 6,842,039 6,865, BGSM Management Sdn Bhd % / ,000,000 2,132,822 2,135, Binariang GSM Sdn Bhd % / ,800,000 4,910,858 4,917, Cahya Mata Sarawak Berhad % / ,500,000 1,538,787 1,549, Celcom Network (M) Sdn Bhd % / ,500,000 1,513,965 1,519, DanaInfra Nasional Berhad % / ,300,000 1,352,086 1,299, Gamuda Berhad % / ,000,000 4,044,149 4,047, IJM Corporation Berhad % / ,000,000 5,157,836 5,157, Imtiaz Sukuk II Berhad % / ,150,000 1,172,511 1,174, Jimah Energy Ventures % / ,000,000 4,427,008 4,448, Jimah Energy Ventures % / ,000 1,048,938 1,057, Jimah Energy Ventures % / , , , Kimanis Power Sdn Bhd % / ,000,000 4,104,401 4,120, Mumtaz Rakyat Sukuk Berhad % / ,200,000 1,221,807 1,231, Projek Lebuhraya Usahasama Berhad % / , , , Projek Lebuhraya Usahasama Berhad % / , , , Projek Lebuhraya Usahasama Berhad % / , , , Sarawak Energy Berhad % / ,000,000 2,077,544 2,084,

27 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) UNQUOTED SUKUK (CONTINUED) Nominal value Carrying value Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % UEM Edgenta Berhad % / ,500,000 2,503,980 2,521, TOTAL UNQUOTED SUKUK 45,000,000 46,705,994 46,758, ACCUMULATED UNREALISED GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 52,379 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 46,758,373 UNQUOTED SUKUK Nominal value Carrying value Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Aman Sukuk Berhad % / ,000,000 1,957,045 2,007, Aquasar Capital Sdn Bhd % / ,500,000 1,552,350 1,579, Bank Islam Malaysia Berhad % / ,450,000 3,556,073 3,632, Benih Restu Berhad % / ,500,000 4,582,708 4,635, DanaInfra Nasional Berhad % / ,300,000 1,353,282 1,344, DanaInfra Nasional Berhad % / ,300,000 1,343,347 1,346, Danga Capital Sdn Bhd - 4.6% / ,000,000 2,055,789 2,079, Goverment Investment Issues % / ,000,000 3,081,861 3,170,

28 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) UNQUOTED SUKUK (CONTINUED) Nominal value Carrying value Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % IJM Corporation Berhad % / ,000,000 3,081,014 3,122, Jimah Energy Ventures % / ,000,000 4,586,306 4,607, Mumtaz Rakyat Sukuk Berhad % / ,200,000 1,221,807 1,237, Projek Lebuhraya Usahasama Berhad % / ,000,000 1,046,158 1,052, Projek Lebuhraya Usahasama Berhad % / ,000,000 6,251,464 6,422, Projek Lebuhraya Usahasama Berhad % / , , , Projek Lebuhraya Usahasama Berhad % / , , , Sarawak Energy Berhad % / ,500,000 3,535,857 3,590, Sarawak Energy Berhad % / , , , Sarawak Energy Berhad % / ,000,000 2,083,157 2,115, TNB Western Energy Berhad % / ,000,000 2,115,857 2,163, UEM Sunrise Berhad - 4.6% / ,000,000 3,063,623 3,072, UEM Sunrise Berhad - 5% / ,000,000 2,045,205 2,090, TOTAL UNQUOTED SUKUK 48,750,000 50,613,658 51,403, ACCUMULATED UNREALISED GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 789,525 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 51,403,183 25

29 7 CASH AND CASH EQUIVALENTS RM RM Islamic deposits with licensed financial institutions 4,150,701 1,472,773 Bank balance in a licensed bank 65, ,121 4,216,374 1,576,894 Weighted average rates of return are as follows: % % Short-term Islamic deposits with licensed financial institutions The Islamic deposits have an average maturity of 128 days ( : 2 days). 8 OTHER PAYABLES RM RM Auditors remuneration 3,025 3,016 Tax agent s fee 4,893 4,890 Sundry payables and accruals 12,132 11,069 20,050 18,975 9 SHARIAH INFORMATION OF THE FUND The Shariah Adviser confirmed that the investment portfolio of the Fund is Shariah-compliant which comprises: (a) (b) The investment in sukuk is as per the list of sukuk available at Bond Info Hub and Fully Automated System For Issuing/Tendering of Bank Negara Malaysia; and Liquid assets in the local market which are placed in Shariah-compliant investments and/or instruments. 10 UNITS IN CIRCULATION No. of units No. of units At beginning of the financial period 106,763,742 96,243,742 Add: Creation of units 1,130,000 4,780,000 Less: Cancellation of units (13,920,000) (3,370,000) At end of the financial period 93,973,742 97,653,742 26

30 11 BROKERS AND FINANCIAL INSTITUITIONS TRANSACTIONS The details of transactions with brokers by value of trade are as follows Name of brokers Value of trades Percentage of total trades Brokerage fees Percentage of total brokerage fees RM % RM % 2017 Hong Leong Bank Berhad 13,165, Bank Islam Malaysia Berhad 9,529, Malayan Banking Berhad 6,257, Ambank Berhad 3,916, Affin Hwang Investment Bank Berhad 1,977, CIMB Investment Bank Berhad 1,970, HSBC Bank Malaysia Berhad 1,501, Kenanga Investment Bank Berhad 1,000, Standard Chartered Bank Malaysia Berhad 504, ,822, For the six months financial period ended 31 October 2017, details of transactions with brokers by value of trades apply only to unquoted sukuk. This took effect on 24 May 2017 as per Securities Commission s Gidelines on Unit Trust Funds. Name of dealers and financial institutions Value of trades Percentage of total trades Brokerage fees Percentage of total brokerage fees RM % RM % 2016 CIMB Investment Bank Berhad 7,114, Hong Leong Bank Berhad 5,784, Bank Islam Malaysia Berhad 5,062, CIMB Islamic Bank Berhad 4,550, Maybank Islamic Bank Berhad 3,505, Malayan Banking Berhad 3,130, RHB Investment Bank Berhad 2,384, Maybank Investment Bank Berhad 1,200, RHB Islamic Bank Berhad 370, Affin Hwang Investment Bank Berhad 257, ,359, As at each financial period, there were no transactions with related parties. 27

31 12 UNITS HELD BY THE MANAGER AND PARTIES RELATED TO THE MANAGER The related parties and their relationship with the Fund are as follows: Related parties Manulife Asset Management Service Berhad Manulife Financial Corporation ("Manulife") Manulife Holdings Berhad Somer Nominees (Far East) Ltd for Manulife Asset Management (Hong Kong) Limited HSBC (Malaysia) Trustee Berhad for Manulife PRS- Conservative Fund HSBC (Malaysia) Trustee Berhad for Manulife PRS- Moderate Fund HSBC (Malaysia) Trustee Berhad for Manulife PRS- Growth Fund CIMB Islamic Trustee Berhad for Manulife Shariah PRS - Conservative Fund CIMB Islamic Trustee Berhad for Manulife Shariah PRS - Moderate Fund CIMB Islamic Trustee Berhad for Manulife Shariah PRS - Growth Fund Relationship The Manager Ultimate Holding Company of the Manager Immediate Holding Company of the Manager Subsidiaries and associate companies of the ultimate holding company of the Manager Trustee of Manulife PRS-Conservative Fund Trustee of Manulife PRS-Moderate Fund Trustee of Manulife PRS-Growth Fund Trustee of Manulife Shariah PRS- Conservative Fund Trustee of Manulife Shariah PRS-Moderate Fund Trustee of Manulife Shariah PRS-Growth Fund (i) Units held by the Manager: PARTIES RELATED TO MANAGER SOMERS NOMINEES (FAR EAST) LTD FOR MANULIFE ASSET MANAGEMENT (HONG KONG) LIMITED MANAGER MANULIFE ASSET MANAGEMENT SERVICES BERHAD * As at: No. of units RM No. of units RM ,617 25, ,129,727 52,063,860 33,987 18,407 28

32 (ii) Units held by parties related to the Manager No. of units RM No. of units RM Manulife (International) Limited 91,582,198 49,628, HSBC (Malaysia) Trustee Berhad for Manulife PRS - Conservative Fund** 207, , HSBC (Malaysia) Trustee Berhad for Manulife PRS - Moderate Fund** 386, , HSBC (Malaysia) Trustee Berhad for Manulife PRS - Growth Fund** 694, , CIMB Islamic Trustee Berhad for Manulife Shariah PRS- Conservative Fund** 57,771 31, CIMB Islamic Trustee Berhad for Manulife Shariah PRS- Moderate Fund** 199, , CIMB Islamic Trustee Berhad for Manulife Shariah PRS- Growth Fund** 730, , * The units are held legally and beneficially. ** The units are held legally. In addition to the related party disclosure mentioned elsewhere in the financial statements, there were no other significant related party transactions and balances. 13 MANAGEMENT EXPENSES RATIO ( MER ) % % MER MER represents expenses including Manager s fee, Trustee s fee, auditors remuneration, tax Agent s fee and other expenses (excluding GST on transaction cost) expressed as an annual percentage of the Fund s average net asset value, calculated on a daily basis. 29

33 14 PORTFOLIO TURNOVER RATIO ( PTR ) PTR (times) PTR represents the average of total acquisitions and disposals of Shariah-compliant investments in the Fund for the financial period over the Fund s average net asset value calculated on a daily basis. 15 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Fund is exposed to a variety of risks which include market risk (including price risk and interest rate risk), credit risk, liquidity risk and capital risk. Financial risk management is carried out through internal control processes adopted by the Manager and adherence to all rules and regulations as stipulated by the Securities Commission s Guidelines on Unit Trust Funds. Market risk (a) Price risk Price risk arises mainly from uncertainty about future prices of unquoted sukuk. It represents the potential loss the Fund may suffer through holding market positions in the face of price movements. The Manager manages the risk of unfavourable changes in prices by continuous monitoring of the performance and risk profile of the investment portfolio. The table below shows the assets of the Fund which are exposed to price risk Unquoted sukuk designated at fair value through profit or loss 46,758,373 51,403,183 *Includes profit receivable of RM772,735 (2016: RM860,350). The table below summarises the sensitivity of the Fund s profit before tax and net asset value to price risk movements of unquoted sukuk. The analysis is based on the assumptions that the market price of unquoted sukuk fluctuates by 5% with all other variables being held constant, and that fair value of the Fund s Shariah-compliant investments moved according to the historical correlation of the index. Disclosures below are shown in absolute terms, changes and impact could be positive or negative. Changes in price Impact on profit before tax Impact on net asset value As at: % RM RM Designated at fair value through profit or loss - Unquoted sukuk 5 2,299,282 2,299,282 RM RM Designated at fair value through profit or loss - Unquoted sukuk 5 2,527,142 2,527,142 30