AMB ETHICAL TRUST FUND INTERIM REPORT. For the Six-Month Period Ended 28 February Manager s Report Trustee s Report 13

Transcription

1 AMB ETHICAL TRUST FUND INTERIM REPORT For the Six-Month Period Ended 28 February 2018 Contents Page Manager s Report 2-12 Trustee s Report 13 Ethical Committee s Report 14 Statement by Manager 15 Auditors Report Statement of Comprehensive Income 20 Statement of Financial Position 21 Statement of Changes in Equity 22 Statement of Cash Flows 23 Notes to the Financial Statements Corporate Information 45 1

2 MANAGER S REPORT AMB ETHICAL TRUST FUND Dear Unit Holders, Amanah Mutual Berhad (AMB), as the Manager of AMB Ethical Trust Fund ( AMBETF or Fund ), is pleased to present the Manager s Report of AMBETF for the six-month period ended 28 February CATEGORY / TYPE Equity Fund / Income and Growth Fund 2. INVESTMENT OBJECTIVE The investment objective of AMBETF is to provide investors with income and capital growth for medium to long term through investments that comply with ethical principles. 3. ETHICAL PRINCIPLES The Fund will screen its investments and remove companies whose principal business involves the promotion of gambling, tobacco and alcohol. This screen is known as the negative filter. The Fund will also abstain from investing in companies that have violated ethical principles. The remaining securities after the negative filters are deemed as ethical. The Fund also has a positive filter as follows: POSITIVE FILTERS i. Environmentally friendly ii. Promote healthy social values iii. Maintain good corporate governance EXAMPLES Provides eco-friendly products and services. Prevention of pollution. Recycling. Promotes sports, community projects Fulfils social obligations. Charitable. Good community relations. Ensure compliance to regulations and proper dissemination of information to stakeholders and employees. Steering management to enhance well-being of employees and customers. 2

3 4. ASSET ALLOCATION 70% - 98% in equities 2% - 30% in cash or bonds (or a combination of both) The Fund may invest up to 25% of its NAV in Asia Pacific markets. The Fund may also invest in stocks that derive the majority of their revenue from the Asia Pacific markets. 5. PERFORMANCE BENCHMARK FTSE Bursa Malaysia KLCI (FBM KLCI) 6. LAUNCH DATE / COMMENCEMENT DATE 7 January 2003 / 28 January DISTRIBUTION POLICY Income distribution (if any) is declared at the end of the financial year of the Fund or for any specified period at the Manager s discretion, subject to Trustee s approval. 8. UNITHOLDING STATISTICS Breakdown of unit holdings by size as at 28 February 2018, are as follows: Size of Holdings No. of Unit Holders No. of Units Held No. % Units % 5,000 and below , ,001 to 10, ,146, ,001 to 50,000 1, ,215, ,001 to 500,000 1, ,880, ,001 and above ,969, TOTAL 2,876 # ,964,799* * Exclude units kept by the Manager. # Include one unit holder, ifast Capital Sdn. Bhd. as our institutional unit trust agent with 64 investors. 3

4 9. FUND PERFORMANCE For Financial Year Interim 28/02/18 As at 31/08/17 As at 31/08/16 As at 31/08/15 Total net asset value (NAV) (RM 000) 150, , , ,060 Units in circulation ( 000) 393, , , ,184 Unit NAV (RM) NAV per unit (ex-date) NAV per unit (highest) NAV per unit (lowest) INVESTMENT PORTFOLIO Sector Interim 28/02/18 % As at 31/08/17 % As at 31/08/16 % As at 31/08/15 % Quoted equity securities Construction Consumer products 4.46 Nil Nil 4.06 Finance Industrial products Infrastructure Nil Nil Preference shares Nil Nil Properties Plantations Right ICULS Nil 0.06 Nil Nil Technology Nil Trading/services Warrants REITs Nil Nil Foreign 6.17 Nil Nil Nil Total quoted equity securities Cash TOTAL Note: The abovementioned percentages are based on the total NAV at the end of the financial year. 4

5 11. PERFORMANCE DATA 11.1 Average Total Return per Annum of AMBETF against Benchmark Period Average Total Return per Annum (%) AMBETF *Benchmark Six months One year Three years Five years Since commencement Source: Lipper *Benchmark = FBM KLCI Note: Annualised Return (Average Total Return per Annum) (%) = [{(1+r1) (1+r2)... (1+rn)} 1/n - 1] x 100 Where r = rate of return, n = number of years 11.2 Annual Total Returns of AMBETF for the Last Five Financial Years For Financial Year Interim 28/02/18 As at 31/08/17 As at 31/08/16 As at 31/08/15 As at 31/08/14 As at 31/08/13 Capital return (%) (2.68) (28.00) Income return (%) Nil Nil Total return of AMBETF (%) (18.24) Total return of *benchmark (%) Source: Lipper *Benchmark = FBM KLCI Note: (14.48) Capital return (%) = NAV per unit on ex-date NAV per unit at the beginning of the financial year 2. Income return (%) = Gross income distribution declared NAV per unit at the beginning of the financial year -1 x 100 x Total return (%) = Capital Return (%) + Income Return (%) Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down as well as up. 5

6 11.3 Income Distributions for the Financial Year For Financial Year Net income distributed (RM 000) Distribution (sen) per unit Interim 28/02/18 As at 31/08/17 As at 31/08/16 As at 31/08/15 Nil 12,308 19,610 24,409 Gross Nil Net Nil Distribution date n/a 31/08/17 31/08/16 31/08/ Other Data For Financial Year Management expense ratio (MER) (%) Portfolio turnover ratio (PTR) (times) Interim 28/02/18 As at 31/08/17 As at 31/08/16 As at 31/08/15 # * Note: MER The MER is the ratio of the sum of fees and expenses incurred by the Fund for the financial year to the average NAV of the Fund calculated on a daily basis. # The MER is lower than the previous financial year due to the expenses incurred during the six-month period only. PTR The PTR is the ratio of average acquisitions and disposals of the Fund for the financial year to the average NAV of the Fund calculated on a daily basis. *The PTR is lower than the previous financial year due to the trading activities done during the six-month period only. 6

7 12. PERFORMANCE REVIEW During the period, AMBETF registered a total return of 4.47% against its benchmark s total return of 4.68%. Thus, AMBETF underperformed the benchmark by 0.21%. The NAV per unit of AMBETF increased to RM as at 28 February 2018 from RM as at 31 August Performance of AMBETF for Six-Month Period (1 September February 2018) *Benchmark: 4.68% AMBETF: 4.47% Source: Lipper *Benchmark = FBM KLCI For the last five financial years, AMBETF registered a compounded return of 46.36%. The benchmark compounded return in the same period was 16.79%. AMBETF outperformed the benchmark by 29.57% over a 5-year period. Performance of AMBETF for the Last Five Financial Years (28 February February 2018) AMBETF: 46.36% *Benchmark: 16.79% Source: Lipper *Benchmark = FBM KLCI 7

8 13. EQUITY MARKET REVIEW (1 September February 2018) During the period under review, the FBM KLCI Index, gained 4.7% to 1,856 points. At the beginning of the period under review, market performance was initially capped by rising geopolitical tension in North Korea which global markets gradually shrugged off due to robust economic data and corporate earnings. However, the FBM KLCI lagged regional peers as investors continued to focus on North Asian markets due to stronger earnings momentum. In its November 2017 Monetary Policy Committee (MPC) meeting, Bank Negara Malaysia (BNM) kept the Overnight Policy Rate (OPR) at 3.00% but indicated that they may review the current degree of monetary policy accommodation. The FBM KLCI index ended December 2017 positively, closing at 1,797 points. Asian markets were off to a good start in 2018 with the Malaysian market continuing its uptrend on foreign buying. BNM raised the OPR by 25 basis points (bps) in January In February 2018, the markets succumbed to selling pressure as inflationary concerns in the United States (US) affected long term bond rates and rattled US markets. The weakness in the US market had a spillover effect worldwide. 14. MONEY MARKET REVIEW (1 September February 2018) During the period under review, money market rates traded higher across the board as BNM hiked the OPR by 25 basis points (bps) in January The increase in the OPR was a pre-emptive move to prevent the build-up of risks that could arise from low interest rates for a prolonged period of time. The central bank was upbeat on global growth and expects the strong global growth momentum to have a positive spillover effect on the domestic economy. BNM expects headline inflation to moderate in The current stance of monetary policy remains accommodative. At the end of the period, the overnight, 1-month, 3-month, 6-month and 12- month rates rose 19 to 25 basis points to 3.18%, 3.40%, 3.67%, 3.78% and 3.88% respectively. 15. STRATEGY EMPLOYED BY INVESTMENT MANAGER DURING THE PERIOD UNDER REVIEW (1 September February 2018) During the period under review, the Manager focused on several investment themes. We selected companies that were beneficiaries of capital management, higher construction spending and strong consumer franchises. AMBETF has employed both negative and positive filters in selecting stocks for investments. All investments whose principal activity involves gaming, tobacco, and alcohol have been excluded under the negative screening. The 8

9 companies are reviewed on their ethical criteria annually or when there is significant development. During the period, the top performing stocks for the Fund were Top Glove Corporation Berhad (Top Glove) and Malayan Banking Berhad(Maybank) while the laggards were IJM Plantations Berhad (IJM Plantations) and Malaysian Resources Corporation Berhad(MRCB). For IJM Plantations, the Fund has cut its exposure due to a constructive view on Crude Palm Oil (CPO) price direction in 2018 whereas the Fund is maintaining its position in MRCB as the balance sheet has been strengthened after a rights issue and prospects are expected to improve. The asset allocation for the period under review is as follows: Asset Allocation Interim 28 February 2018 As at 31 August 2017 RM % RM % Quoted equity securities 136,925, ,449, Cash and cash equivalent 16,107, ,389, TOTAL 153,032, ,839, ECONOMIC REVIEW AND OUTLOOK The International Monetary Fund (IMF) raised global growth outlook for 2018 to 3.9% in January 2018 from 3.7% in October 2017 and projects global growth to sustain at 3.9% for The higher growth numbers reflect increased global growth momentum and the impact expected from the recent US tax policy changes. However, accelerating inflation may result in faster-than-expected monetary tightening in 2018 especially in advanced economies such as the US and the Eurozone while a faster-than-expected US Federal Funds Rate (FFR) hike would add greater volatility to global financial markets as bond yields rise. The US economy grew slower in fourth quarter 2017 (4Q17) at 2.6% quarter-onquarter (qoq) real GDP from above 3% in third quarter 2017 (3Q17). Domestic demand, especially from consumption which was supported by a favourable labour market, was the biggest contributor to growth. For the whole of 2017, the economy grew by 2.3% from 1.5% previously. Meanwhile, inflation rose by 2.1% in December Given the rather stable inflation and unemployment rate, the Federal Reserve (Fed) hiked the FFR for the third time in 2017 in its December meeting to 1.25%-1.50% range. Growth forecasts: Fed (2018: 2.5%, 2019: 2.1%), IMF (2018: 2.7%, 2019: 2.5%). The Eurozone s economy grew by 2.7% in 4Q17 according to the preliminary flash estimate by the Eurostat from 2.8% in 3Q17. Unemployment rate remained at 8.7% for December The consumer price index (CPI) rose by 1.3% in January 2018 compared to 1.4% in December 2017 while core inflation improved to 1% in January 2018 from 0.9% in December The rise in core 9

10 inflation and stable unemployment rate would support the European Central Bank s (ECB) decision to reduce its asset purchases beginning January 2018 until September 2018 to EUR30 billion from EUR60 billion per month previously. Brexit discussions will continue to take center stage as it nears its expiry date in March Growth forecasts: ECB (2018: 2.3%, 2019: 1.9%), IMF (2018: 2.2%, 2019: 2.0%). Japan s economy grew 2.5% on an annualised quarter-on-quarter (qoq) basis in 3Q17 benefitting from higher external demand as net trade contributed 2.1 percentage points. However, lacklustre domestic demand dragged down economic growth by 1.2 percentage points. In December 2017, Japan s overall CPI growth accelerated to 1% yoy after growing 0.6% in November The Bank of Japan (BOJ) revised upwards the range for real GDP forecasts for 2018 and 2019 fiscal years in view of the improving business condition, likely driven by the improvement in global economic activity which had supported exporters, especially manufacturers. On the monetary policy front, the BOJ maintained its monetary policy stance in January Growth forecasts: BOJ (2018: 1.4%, 2019: 0.7%), IMF (2018: 1.2%, 2019: 0.9%). Consensus still expects China to grow above 6% in 2018 and Factors that could support economic growth include resilient consumption, expansionary business surveys and continued commitment towards achieving financial stability. On external factors, trade surplus widened to USD54.7 billion in December 2017 from USD39 billion previously. Exports grew by 10.9% in December 2017 and imports by 4.5% yoy. As consensus do not expect major disruption to trade arising from trade wars for now, China s exports stand to benefit from improving global economic growth. Growth forecasts: IMF (2018: 6.6%, 2019: 6.4%), World Bank (2018: 6.4%, 2019: 6.3%). Malaysia's economy grew 5.9% yoy in 4Q17, above expectations of a 5.8% yoy growth. Overall 2017 expansion recorded a 3-year high of 5.9% yoy from 4.2% yoy in The official forecast for 2018 is between 5.0%-5.5% yoy, mainly on high base effect. In December 2017, exports expanded by only 4.7% yoy compared to 14.5% yoy in November 2017, translating into a 5.0% month-onmonth (mom) contraction while imports growth halved to 7.9% yoy from 15.2% yoy in November Overall 2017 exports growth averaged at 18.9% yoy while trade surplus widened to RM97.3 billion, a 10.3% yoy rise from RM88.2 billion in 2016 attributed to performance of exports. Meanwhile, headline inflation inched slightly to 3.5% yoy in December 2017 following the 11.5% yoy increase in transport costs during the month on higher Brent crude oil price, coupled with the 4.1% yoy increase in food & non-alcoholic beverages segment. Average CPI growth for 2017 is 3.8% yoy against 2.1% yoy in The global stock market s bull run in 2017 ended the first month of 2018 in the green territory. The MSCI World Index rose 23.5% yoy in January 2018 after a 20.1% yoy jump in December The US Dow Jones Industrial Average (DJIA) Index jumped by 31.6% yoy for January 2018 compared to 25.1% recorded in December 2017 supported by an expanding US economy, corporate profits growth and excitement over the recently enacted tax cuts. Similarly, all stock indices of ASEAN markets recorded double-digit gains, led by Indonesia and the 10

11 Philippines. Indonesian s Jakarta Composite Index (JCI) rose by 24.8% yoy, Philippines Composite Index (PCOMP) by 21.2% yoy and Singapore s Strait Times Index (STI) by 16.0% yoy. Meanwhile, the Stock Exchange of Thailand (SET) Index climbed 15.8% yoy as Malaysia s FBM KLCI ended up 11.8% yoy. Earlier in the month, the FBM KLCI breached the 1,800 level, which was last seen in Foreign investors remained net buyers of the FBM KLCI in January 2018, buying RM3.4 billion during the month. 17. INVESTMENT STRATEGY MOVING FORWARD We are positive on the Malaysian market due to profit taking activities after strong performance in 2017, slowing momentum in foreign portfolio inflows, and the upcoming General Elections. With USD strength capped, we believe this would create conducive environment for performance from Emerging Markets including Malaysia. We would continue to employ a stockpicking strategy to focus on companies that meet the Ethical principles and can benefit from selected themes including infrastructure spending, improving consumer sentiment, and corporate restructuring. Given the expected roll out of major projects like East Coast Rail Link (ECRL), KL- Singapore High Speed Rail (HSR) and Klang Valley Mass Rapid Transit (KVMRT3) and Pan Borneo Highway, we anticipate strong construction job flows to sustain interest in the construction sector. We would look for opportunities in contractors who would be major beneficiaries of the pending awards. The Malaysian Institute for Economic Research (MIER) Consumer Sentiment Index has shown tentative signs of slight recovery. The recent strength in the Ringgit against the US Dollar is expected to help consumer sentiment. We are anticipating investment opportunities in high quality consumer franchises. Over the medium term, the Government Linked Companies (GLC) transformation would be positive for the performance of the local bourse given that GLCs are a sizeable segment of the Malaysian market. 18. SIGNIFICANT CHANGES ON STATE OF AFFAIRS OF AMBETF There are no significant changes on state of affairs of AMBETF for the financial period under review. 19. CIRCUMSTANCES THAT MATERIALLY AFFECT ANY INTERESTS OF THE UNIT HOLDERS AMB and AMBETF have no circumstances that materially affect any interests of the unit holders. 11

12 20. CHANGES TO THE SWITCHING CHARGES There are changes to the switching charges in the latest master prospectus (Conventional funds) dated 17 September 2017 which is available at To recipient fund Switching from Equity Bond/Sukuk/ Fixed Income Balanced Money market Equity Up to 2.5% of amount switched MYR25 per transaction MYR25 per transaction Nil Bond/Fixed Income Up to 4.5% of amount switched MYR25 per transaction Up to 3% of amount switched Nil Balanced Up to 1.5% of amount switched MYR25 per transaction MYR25 per transaction Nil Money market Up to 6.5% of amount switched Up to 2% of amount switched Up to 5% of amount switched Not applicable 21. POLICY ON SOFT COMMISSIONS RECEIVED FROM BROKERS During the period under review, AMB and the Investment Manager of AMBETF did not receive any soft commissions from brokers and/or any related body corporate in relation to their management of AMBETF. The Manager AMANAH MUTUAL BERHAD 12

13 TRUSTEE'S REPORT for the Six-Month Period Ended 28 February 2018 We, have acted as Trustee of AMB Ethical Trust Fund ("the Fund") for the period ended 28 February To the best of our knowledge, Amanah Mutual Berhad ("the Management Company"), has operated and managed the Fund in accordance with the following:- a) b) c) limitations imposed on the investment powers of the Management Company and the Trustee under the Deeds, the Securities Commission's Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirements. For HSBC (Malaysia) Trustee Berhad Tan Bee Nie Head, Trustee Operations Kuala Lumpur, Malaysia 15 March

14 REPORT OF THE ETHICAL ADVISORY COMMITTEE TO THE UNIT HOLDERS OF AMB ETHICAL TRUST FUND We have acted as the Ethical Advisory Committee of AMB Ethical Trust Fund ("the Trust"). Our responsibility is to ensure that the procedures and processes employed by Amanah Mutual Berhad ("the Manager") and that the provisions of the Deed dated 4 December 2002, 12 March 2012, 20 June 2012 and 27 January 2016 are in accordance with the Ethical Principles set out for the Trust. In our opinion, the Manager has managed and administered the Trust in accordance with Ethical Principles and complied with applicable guidelines, ruling or decision issued by any relevant laws pertaining to ethical matters. For and on behalf of the Ethical Advisory Committee of AMB Ethical Trust Fund. Dato' Seri Dr. Haji Arshad bin Haji Hashim Chairman Kuala Lumpur, Malaysia 15 March

15 STATEMENT BY MANAGER TO THE UNIT HOLDERS OF AMB ETHICAL TRUST FUND We, being two of the Directors of AMANAH MUTUAL BERHAD, the Manager of AMB ETHICAL TRUST FUND ("the Trust"), do hereby state that, in the opinion of the Manager, the accompanying financial statements of the Trust for the six-month period ended 28 February 2018, together with the notes thereto, have been properly drawn up in accordance with Malaysian Financial Reporting Standard 134: Interim Financial Reporting ("MFRS 134"), so as to give a true and fair view of the financial position of the Trust as at 28 February 2018, and of its financial performance and cash flows for the sixmonth period then ended. Signed on behalf of AMANAH MUTUAL BERHAD, being the Manager of AMB ETHICAL TRUST FUND, in accordance with a resolution of the Directors dated 15 March Tan Sri Abdul Wahid bin Omar Chairman Dato' Abdul Rahman bin Ahmad Director Kuala Lumpur, Malaysia 15 March

16 Independent auditors report to the unit holders of AMB Ethical Trust Fund Report on the audit of the financial statements Opinion We have audited the financial statements of AMB Ethical Trust Fund ("the Trust"), which comprise the statement of financial position as at 28 February 2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, and notes to the financial statements, including a summary of accounting policies, as set out on pages 20 to 44. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Trust as at 28 February 2018, and of its financial performance and cash flows for the six-month period then ended in accordance with Malaysian Financial Reporting Standard 134: Interim Financial Reporting ("MFRS 134"). Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and other ethical responsibilities We are independent of the Trust in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Information other than the financial statements and auditors report thereon The Manager of the Trust is responsible for the other information. The other information comprises the information included in the interim report of the Trust but does not include the financial statements and our auditors report thereon. The interim report is expected to be made available to us after the date of this auditors report. Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. 16

17 Independent auditors report to the unit holders of AMB Ethical Trust Fund (Cont'd.) Information other than the financial statements and auditors report thereon (cont'd.) When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and to report such facts as necessary. Responsibility of the Manager and Trustee for the financial statements The Manager is responsible for the preparation of financial statements of the Trust that give a true and fair view in accordance with MFRS 134. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements of the Trust that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Trust, the Manager is responsible for assessing the Trust s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intend to liquidate the Trust or to cease operations, or have no realistic alternative but to do so. The Trustee is responsible for overseeing the Trust's financial reporting process. The Trustee is also responsible for ensuring that the Manager maintains proper accounting and other records as are necessary to enable true and fair presentation of these financial statements. Auditors responsibility for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Trust as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 17

18 Independent auditors report to the unit holders of AMB Ethical Trust Fund (Cont'd.) Auditors responsibility for the audit of the financial statements (cont'd.) As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements of the Trust, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Trust s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Trust or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Trust to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Trust, including the disclosures, and whether the financial statements of the Trust represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 18

19 Independent auditors report to the unit holders of AMB Ethical Trust Fund (Cont'd.) Other matters This report is made solely to the unit holders of the Trust, as a body, in accordance with the Guidelines on Unit Trust Funds issued by the Securities Commission Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Muhammad Syarizal bin Abdul Rahim No /01/2019 J Chartered Accountant Kuala Lumpur, Malaysia 15 March

20 AMB ETHICAL TRUST FUND STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX-MONTH PERIOD ENDED 28 FEBRUARY 2018 INCOME Six-month Six-month period ended period ended Note RM RM Dividend income 1,971,408 1,906,499 Interest income 360, ,142 Net gain on fair value changes of FVTPL investments 7,058,549 4,222,087 Net foreign currency exchange loss 7 (696,310) - 8,693,992 6,652,728 EXPENSES Manager's fee 4 1,182,584 1,376,319 Trustee's fee 5 63,071 73,403 Auditors' remuneration 4,000 4,000 Tax agent's fee 2,250 2,250 Brokerage and other transaction fees 277, ,772 Administrative expenses 123, ,564 1,653,170 1,788,308 NET INCOME BEFORE TAXATION 7,040,822 4,864,420 TAXATION NET INCOME AFTER TAXATION REPRESENTING TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 7,040,822 4,864,420 Net income after tax is made up of the following: Realised 5,762,170 (2,365,932) Unrealised 1,278,652 7,230,352 7,040,822 4,864,420 The accompanying notes form an integral part of the financial statements. 20

21 AMB ETHICAL TRUST FUND STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2018 ASSETS Note RM RM Investments at FVTPL 8 136,925, ,449,800 Deposits with financial institutions 9 12,613,472 32,699,069 Tax recoverable 42,527 42,527 Other receivables 10 64,110 30,826 Amount due from manager 1,816 - Amount due from stockbrokers 520,528 - Cash at bank 3,494, ,467 TOTAL ASSETS 153,661, ,912,689 LIABILITIES Provision for distribution 11-12,307,809 Other payables 61,747 65,654 Amount due to Manager 12 1,115, ,515 Amount due to Trustee 9,892 12,299 Amount due to stockbrokers 1,532,887 - TOTAL LIABILITIES 2,719,947 13,194,277 EQUITY Unit holders' capital ,466, ,283,784 Reserves 27,475,450 20,434,628 TOTAL EQUITY/NET ASSET VALUE ATTRIBUTABLE TO UNIT HOLDERS 150,941, ,718,412 TOTAL EQUITY AND LIABILITIES 153,661, ,912,689 NUMBER OF UNITS IN CIRCULATION ,979, ,354,480 NET ASSET VALUE PER UNIT The accompanying notes form an integral part of the financial statements. 21

22 AMB ETHICAL TRUST FUND STATEMENT OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIOD ENDED 28 FEBRUARY 2018 Reserves Unit holders' Realised Unrealised capital Distributable Non-distributable Total equity RM RM RM RM At 1 September ,283,784 5,065,368 15,369, ,718,412 Total comprehensive income for the period - 5,762,170 1,278,652 7,040,822 Creation of units for - distribution 6,981, ,981,600 - sales 779, ,670 Cancellation of units (14,602,920) - - (14,602,920) Distribution equalisation - for the period (5,975,768) - - (5,975,768) At 28 February ,466,366 10,827,538 16,647, ,941,816 At 1 September ,296,137 (3,336,829) 5,994, ,953,594 Total comprehensive income/(loss) for the period - (2,365,932) 7,230,352 4,864,420 Creation of units for - distribution 11,367, ,367,955 - sales 173, ,884 Cancellation of units (10,944,599) - - (10,944,599) Distribution equalisation for the period 416, ,658 At 28 February ,310,035 (5,702,761) 13,224, ,831,912 The accompanying notes form an integral part of the financial statements. 22

23 AMB ETHICAL TRUST FUND STATEMENT OF CASH FLOWS FOR THE SIX-MONTH PERIOD ENDED 28 FEBRUARY 2018 CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES Six-month Six-month period ended period ended RM RM Proceeds from sale/redemption of investments 58,181,541 39,502,538 Purchase of investments (51,163,467) (37,686,743) Net realised foreign exchange loss (410,510) - Net dividend received 1,928,845 1,942,961 Interest received 369, ,799 Manager's fee paid (1,298,677) (1,422,798) Trustee's fee paid (69,262) (75,882) Payment for other fees and expenses (41,052) (119,614) Auditors' remuneration paid (4,000) (20,000) Net cash generated from operating and investing activities 7,493,041 2,688,261 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 1,384, ,315 Payments for cancellation of units (26,159,274) (21,944,768) Net cash used in financing activities (24,774,999) (21,639,453) NET DECREASE IN CASH AND CASH EQUIVALENTS (17,281,958) (18,951,192) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 33,389,536 48,320,344 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 16,107,578 29,369,152 CASH AND CASH EQUIVALENTS COMPRISE: Cash at bank 3,494,106 66,024 Deposits with financial institutions (Note 9) 12,613,472 29,303,128 16,107,578 29,369,152 The accompanying notes form an integral part of the financial statements. 23

24 AMB ETHICAL TRUST FUND NOTES TO THE FINANCIAL STATEMENTS - 28 FEBRUARY THE TRUST, THE MANAGER AND THEIR PRINCIPAL ACTIVITIES AMB Et hical Trust Fund (hereinaft er referred t o as "t he Trust") was const it ut ed pursuant t o t he execut ed Deed dat ed 4 December 2002 between Amanah Mutual Berhad as the Manager, and HSBC (Malaysia) Trustee Berhad as the Trustee and the Registered Holders of the Trust. Subsequently, Supplemental Deeds dated 12 March 2012, 20 June 2012 and 27 January 2016 made between Amanah Mutual Berhad and HSBC (Malaysia) Trust ee Berhad have been issued. The Trust commenced operations on 7 January 2003 and will continue to be in operations until terminated by the Trustee as provided under the Deed. The principal act ivit y of t he Trust is t o invest in a select ed porfolio of investments that comply with Ethical Principles. The investments include st ocks and shares of companies quot ed on Bursa Malaysia Securit ies Berhad, fixed income securit ies and short t erm deposit s. Amanah Saham Nasional Berhad ("ASNB") and Permodalan Nasional Berhad ("PNB"), companies incorporat ed in Malaysia, are t he holding and ultimate holding company of the Manager, respectively. The Manager, a company incorporat ed in Malaysia, is principally engaged in t he management of unit trust funds. The financial st at ement s were aut horised for issue by t he Board of Direct ors of AMB in accordance with the resolution of the Directors on 15 March BASIS OF PREPARATION The financial statements for the six-month period ended 28 February 2018 have been prepared in accordance wit h Malaysian Financial Report ing St andards ("MFRS") and Int ernat ional Financial Report ing St andards ("IFRS"). (a) Early adoption of MFRS 9 Financial Instruments : Classification and Measurement ("MFRS 9") The Trust has applied MFRS 9 Financial Inst rument s ("MFRS 9") (as issued in November 2009 and revised in Oct ober 2010) and t he relat ed consequential amendments in advance of their effective dates. The date of initial application (i.e the date on which the Trust has assessed it s exist ing financial asset s and financial liabilit ies) is 1 Sept ember (b) Changes in accounting The new and revised MFRSs which are mandatory for companies with financial period beginning on or after 1 September 2017 do not give rise to any significant effects on the financial statements of the Trust. 24

25 2. BASIS OF PREPARATION (CONTD.) (c) Standards issued but not yet effective The Standards, Amendments and Issues Committee ( IC ) Interpretations that have been issued by the Malaysian Accounting Standards Board ( MASB ) but are not yet effective as at the date of authorisation of these financial statements are not relevant to the Trust except for MFRS 9. Effective for financial periods beginning on or after 1 January 2018 MFRS 9 Financial Instruments (IFRS 9 as issued by IASB in July 2014) On 24 July 2014, the International Accounting Standard Boards ("IASB") issued the final version of IFRS 9 which includes the three phases of the financial instruments projects; Classification and Measurement, Impairment (Expected Credit Losses) and Hedge Accounting. Subsequently, MASB issued a pronouncement on 17 November 2014 to fully adopt the new IFRS 9 requirements. As the Trust has early adopted the previous version of MFRS 9 prior to 31 January 2015, the Trust may continue to apply that version of MFRS 9 until the mandatory effective date of 1 January The Trust is still in the process of quantifying the effect of the adoption of the final version of MFRS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Financial instruments Financial assets and financial liabilities are recognised when the Trust becomes a party to the contractual provision of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. 25

26 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) (b) Financial assets All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place. All recognised financial assets are subsequently measured in their entirety at amortised cost or fair value, depending on the classification of the assets. (i) Classification of financial assets Unless designated as at on initial recognition, debt instruments that meet the following conditions are subsequently measured at amortised cost less impairment loss: the asssets are held within a business model whose objectives is to hold assets in order to collect contractual cash flows ; and the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Debt instruments that do not meet the criteria above are classified as FTVPL. Equity instruments are classified as either FVTPL or FVTOCI, depending on the investment objectives. (ii) Financial assets at fair value through profit or loss ("FVTPL") Investments in equity instruments are classified as FVTPL, unless the Trust designates an investment that is not held for trading asfvtoci on initial recognition. A financial asset is held for trading if : it has been acquired principally for the purpose of selling it in the near term; or on initial recognition it is part of the portfolio of identified financial instruments that the Trust manages together and has evidence of a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee. 26

27 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) (b) Financial assets (contd.) (ii) Financial assets at fair value through profit or loss ("FVTPL")(contd.) (iii) Debt instruments that do not meet the amortised cost criteria (see above) are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria but are designated as at FVTPL are measured at FVTPL. A debt instrument may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. Debt instruments are reclassified from amortised cost to FVTPL when the business model is changed such that the amortised cost criteria are no longer met. Reclassification of debt instruments that are designated as at FVTPL on initial recognition is not allowed. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss. Interest income on debt instruments as at FVTPL is disclosed separately in the profit or loss. Dividend income on investments in equity instruments at FVTPL is recognised in profit or loss when the Trust's right to receive dividends is established in accordance with MFRS 118 Revenue and is disclosed separately in the profit or loss. Financial assets at fair value through other comprehensive income ("FVTOCI") On initial recognition, the Trust can make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading. Debt instruments with the investment objectives to achieve both the collection of contractual cash flows and the sales of financial assets are designated as FVTOCI. 27

28 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) (b) Financial assets (contd.) (iii) Financial assets at fair value through other comprehensive income ("FVTOCI") (contd.) Financial assets at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the unrealised reserve. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the investments. (iv) Impairment of financial assets Financial assets that are measured at amortised cost are assessed for impairment at the end of each reporting period. Financial assets are considered tobeimpaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, estimated future cash flows of the asset have been affected. Objective evidence of impairment could include: Significant financial difficulty of the issuer or counterparty; or Breach of contract, such as default or delinquency in interest or principal payments; or It becomes probable that the borrower will enter bankruptcy or financial reorganisation; or The disappearance of an active market for that financial asset because of financial difficulties. The amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of the estimated future cash flows reflecting the amount of collateral and guarantee, discounted at the financial asset's original effective interest rate. 28

29 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) (b) Financial assets (contd.) (iv) Impairment of financial assets (contd.) The carrying amount of the financial asset is directly reduced by the impairment loss for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised in profit or loss. 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 was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. (v) Derecognition of financial assets The Trust derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Trust neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Trust recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Trust retains substantially all the risks and rewards of ownership of a transferred financial asset, the Trust continues to On derecognition of financial asset classified as FVTOCI, the cumulative gain or loss previously accumulated in unrealised reserve is not reclassified to profit or loss, but is reclassified to distributable realised reserve. On derecognition of financial asset classified as FVTPL, the cumulative unrealised gain or loss previously recognised is transferred to realised gain or loss on disposal in profit or loss. 29

30 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) (c) Financial liabilities and equity instruments (i) Classification as debt or equity Debt and equity instruments issued by the Trust are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. (ii) Financial liabilities Financial liabilities, within the scope of MFRS 9, are recognised in the statement of financial position when, and only when, the Trust becomes a party to the contractual provisions of the financial instruments. (iii) Derecognition of financial liabilities The Trust derecognises financial liabilities when, and only when, the Trust s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. (iv) Unit holders' capital The unit holders' contributions to the Trust meet the definition of puttable instruments classified as equity instruments under the revised MFRS 132 Financial Instruments: Presentation. Distribution equalisation represents the average distributable amount included in the creation and cancellation prices of units. The amount is either refunded to unit holders by way of distribution and/or adjusted accordingly when units are cancelled. (d) Foreign currency (i) Functional and presentation currency The financial statements of the Trust are measured using the currency of the primary economic environment in which the Trust operates ("the functional currency"). The financial statements are presented in Ringgit Malaysia ("RM"), which is also the Trust's functional currency. 30

31 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD.) (d) Foreign currency (contd.) (ii) Foreign currency transactions Transactions in foreign currencies are measured in the functional currency of the Trust and are recorded on initial recognition in the functional currency at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Nonmonetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss. Exchange differences arising on the translation of nonmonetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of nonmonetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such nonmonetary items are also recognised directly in equity. (e) Income recognition Gross dividend income from investments are recognised on a declared basis when the right to receive dividends has been established. Realised gain on disposal of investments is measured as the difference between the net proceeds and its carrying amount. Interest income from investments at amortised cost are accounted for on an accrual basis based on effective interest rate method. (f) Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents include cash at bank and highly liquid instruments with maturities three months or less, which have an insignificant risk of changes in value. 31