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 39 i

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4 MANULIFE INVESTMENT SYARIAH INDEX FUND 1 GENERAL INFORMATION 1.1 THE TRUST The Fund commenced operations on 4 January 2002 and will continue its operations until terminated as provided under Clause 12 of the Deed. 1.2 FUND TYPE / CATEGORY Index Tracking / Islamic Equity 1.3 OBJECTIVE OF THE FUND To track the performance of the FTSE Bursa Malaysia Emas Shariah Index (FBMSHA). The Fund also aims to generate annual distribution. 1.4 DISTRIBUTION POLICY Annually 1.5 PERFORMANCE BENCHMARK The performance of the Fund is measured against the FBMSHA. 1.6 CHARACTERISTICS AND GENERAL COMPOSITION OF THE FBMSHA The FBMSHA comprises constituents of the FBMEMAS that are Shariah-compliant according to the Securities Commission s SAC (Shariah Advisory Council) screening methodology and FTSE s screens of free float, liquidity and investability. The index has been designed to provide investors with a broad benchmark for Shariahcompliant investment. The index was developed with a base value of 100 as of 31 March Each Shariah-compliant component stock is weighted by means of free-float adjusted market capitalisation so that it will influence the index in proportion to its relative market importance. Shariah-compliant stocks are free-float weighted to ensure that only the investable opportunity set is included within the index, and are also liquidity screened to ensure that the index is tradable. Bursa Malaysia defines this methodology based on its own rules and therefore, any error or adherence thereof may affect the accuracy and completeness in the calculation of the FBMSHA. Investors may obtain more information about the FBMSHA s calculation mode and rules from Bursa Malaysia s website: The FBMSHA is a useful summary measure of current expectation of future outlook. The FBMSHA gives a big-picture view of the movement in prices of the key Shariah-compliant stocks and more often than not, serves as a broad indicator of the economic performance of the country mainly because it represents the breadth and depth of Shariah-compliant stocks which are involved in the various sectors of the economy. 1

5 1.7 INVESTMENT STYLE AND STRATEGY The Fund Manager employs an index sampling approach to track the performance of the FBMSHA. The Fund typically invests up to 98% of its assets in the top-tier Shariah-compliant stocks of the target index (covering nearly 80% of FBMSHA s market capitalisation) and in a representative sample of the remaining constituents. The Fund holds a range of Shariahcompliant equities, predominantly in FBMSHA stocks that in aggregate, approximate the full FBMSHA in terms of key characteristics, including industry weightings and market capitalisation. The Fund s portfolio composition is rebalanced when necessary to take into account changes in weightings or corporate activities in order to minimise tracking errors. During the six months financial period under review, the Fund remained guided by its investment objective to track the performance of the FTSE Bursa Malaysia Emas Shariah Index by investing predominantly in the index-linked Shariah-compliant stocks. 2

6 2 MANAGER S REPORT 2.1 FUND PERFORMANCE For the six months financial period ended 31 December 2017, the Fund s return increased by 4.57%. The Fund managed to outperform its benchmark return, the FBMSHA, which increased by 3.75%. The Fund s outperformance was mainly derived from income return during the period. The graph below compares the 6-month performance of the Fund against its benchmark return: 5% 4% 3% 2% 1% 0% -1% -2% Jun 17 Fund Performance vs. Benchmark Index Return Jul 17 Aug 17 Sep 17 Manulife Investment Shariah Index Fund Return Source: Lipper & Morning Star Fund Size Oct 17 Nov 17 Dec 17 Benchmark Index Return The Fund s total NAV decreased to RM54.70mil from RM67.61mil during the six months financial period under review. Fund s Returns (a) The graph below compares the 5-year performance of the Fund against its benchmark return: 25% 20% 15% 10% 5% 0% -5% Dec 12 Apr 13 Fund Performance vs. Benchmark Index Return Aug 13 Dec Apr Aug 14 Dec Apr Aug 15 Manulife Investment Shariah Index Fund Return Source: Lipper & Morning Star Dec Apr Aug 16 Dec Apr Aug Dec 17 Benchmark Index Return (b) Average Total Return of the Fund: For the financial period ended 31 December 2017 Fund (% p.a.) FBMSHA (% p.a.) 1 year years years Commencement Date: 4 January 2002 Source: Lipper & Morning Star 3

7 (c) Annual Total Return of the Fund: For the financial period ended: Fund (% p.a.) FBMSHA (% p.a.) 31 December December 2016 (4.98) (6.14) 31 December December 2014 (2.04) (4.17) 31 December Commencement Date: 4 January 2002 Source: Lipper & Morning Star 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% The following table shows other financial and performance data of the Fund for the past three financial periods: Fund Data 31 December December December 2015 Net Asset Value (RM) 54,696,416 70,350,794 81,227,921 Units in Circulation ( 000) 78, , ,388 NAV (RM per unit) Highest / Lowest NAV (RM per unit) Total Fund Return (%) NAV Return (%) Income Return (%) / / (0.14) (0.14) / Management Expense Ratio (%) Portfolio Turnover Ratio (times)

8 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 remains consistent with the previous financial period. (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 as compared to the previous financial period mainly due to increase in 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. 5

9 2.2 ASSET ALLOCATION Asset allocation for the past three financial periods: Sector Allocation 31 December 2017 % of Net Asset Value 31 December December 2015 Trading/Services Industrial Products Plantation Construction Property Consumer Products Technology Infrastructure Project Companies Islamic Real Estate Investment Trusts (i-reits) Finance Special Purpose Acquisition Company (SPAC) Total Shariah-compliant Investments Islamic Deposits With Licensed Financial Institutions Other Assets & Liabilities As at 31 December 2017, the Fund was 97.24% invested. It was mainly invested in the Trading and Services, Industrial Products and Plantation sectors 2.3 MARKET REVIEW The six months financial period under review (1st July 2017 to 31st December 2017) started off with global markets in a jittery mood as tensions between the US and North Korea escalated. However, investor sentiment soon turned bullish, with each pullback met with a strong rebound as positive economic data pointed towards a synchronised global growth. In addition, central banks continued to be accommodative, and expectations of Trump s tax plan helped to bolster investor sentiment. The period saw several tailwinds emerge from positive economic and political news flow, which helped to further support global markets. The US posted a strong 3Q 2017 gross domestic product (GDP) growth, favourable corporate earnings results, and the eventual signing of the Republican tax reform bill into law. In addition, the US continued to exhibit a robust labour market, reinforcing the Federal Reserve s third interest rate hike in 2017 to 1.50%. From Asia, China s Communist Party Congress concluded with President Xi Jinping strengthening his position at the top as General Secretary of the Party for another term. In addition, Japan continued its economic revival, registering its seventh consecutive quarter of GDP growth (3Q17: 0.6% quarter-on-quarter) and its central bank reassuring the markets that it intends to maintain its dovish stance, which added more to the bullish sentiment throughout the period. 6

10 Malaysia however bucked the global trend, with its equity market weak for most of the period from a lack of fresh catalysts. The 2018 Budget announcement failed to excite as it came in generally in line with expectations. For its corporate sector, its 2Q and 3Q 2017 results reporting seasons were uninspiring, with the large caps generally in line with expectations. The proposed merger between RHB Bank and AMMB was aborted and Sime Darby s much-touted demerger exercise also did not bring much excitement to the market. It was largely weighed down by high valuations for both its plantation and property entities; however both entities experienced a sudden spike on the last trading day of the year, likely on the back of window-dressing activities. For the period under review, the FBM KLCI registered a return of 1.88%. The broader markets were mixed versus the FBM KLCI, with the FBM Mid 70, and Small Cap index returning 6.71%, and -2.25% respectively. The FBM Emas Shariah Index was up by 3.75%. 2.4 MARKET OUTLOOK AND INVESTMENT STRATEGY Global growth continues to be synchronised and broad base. Rate hike is the US remains as evidence to the overall improvement in the US economy. Fed raised the US 2018 GDP growth to 2.5%, up from previous forecast of 2.1%; while GDP forecast for 2019 was revised upwards to 2.1% from previous expectation of 2.0%, referencing a potential lift in economic activity at the back of the US tax reform. Recent inflation readings were below the Fed s target of 1.9%, reemphasising the Fed s to continued accommodative and gradual stance in the monetary policy tightening. On Europe front, the European Central Bank opted to keep interest rates unchanged. Similarly to the US, ECB upgraded its 2018 GDP forecast to 2.3% from 1.8% previously, but expressed some concern over inflation. That said, ECB is likely to remain gradual in its normalisation of monetary policy. The ongoing economic expansion in the Euro area is expected to continue to be supported by the ECB s monetary policy measures. Over is Asia, even though China s economic growth slowed but steady deceleration will continue in 2018 as policymakers continue to rebalance the country s economic model. Its equity market will continue to benefit from the stabilisation of the Chinese economy, with growth still promising, supported by ongoing modest fiscal expansion. Locally, the Malaysian market has shown some positive signs. Both domestic and foreign participation are increasing and gradually shifting back to the market. Stronger external demand and infrastructure spending will continue to support economic growth. Thematic plays on the 14th General Election (GE14), interest rate hike and infrastructure spending are key positive themes increasingly boosting market sentiment. Undemanding market valuation against regional peers should continue to attract more foreign interest, in addition to favourable uptrend of the Ringgit and crude oil. For the Fund, our strategy remains to track the performance of the FTSE Bursa Malaysia Emas Shariah Index, by investing predominantly in FBMSHA stocks. 2.5 BREAKDOWN OF UNIT HOLDINGS BY SIZE AS AT 31 DECEMBER 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 50,000 1, , ,001 to 500, , Above 500, Manager s stock Total 3, ,

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 December 2017, the Management Company or its Fund Manager did not receive any rebates or soft commissions. 8

12 4 STATEMENT BY THE MANAGER MANULIFE INVESTMENT 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 December 2017 and of its financial performance, changes in equity and cash flows of the Fund for the six months financial period ended 31 December 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 14 February

13 5 TRUSTEE S REPORT TO THE UNIT HOLDERS OF MANULIFE INVESTMENT We have acted as Trustee of Manulife Investment Syariah Index Fund ("the Fund") for the financial period ended 31 December To the best of our knowledge, Manulife Asset Management Services Berhad ( the Manager ) has managed the Fund in the financial period under review in accordance with the following: a) Limitations imposed on the investment powers of the Manager under the deed, securities laws and Guidelines on Unit Trust Funds; b) Valuation and pricing of the Fund are carried out in accordance with the deed and any regulatory requirement; and c) Creation and cancellation of units are carried out in accordance with the deed and any regulatory requirement. For Maybank Trustees Berhad (Company No.:5004-P) BERNICE K M LAU Head, Operations Kuala Lumpur, Malaysia 14 February

14 6 SHARIAH ADVISER S REPORT TO THE UNIT HOLDERS OF MANULIFE INVESTMENT MANULIFE INVESTMENT We have acted as the Shariah Adviser of Manulife Investment Syariah Index Fund. 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 Investment Syariah Index Fund in accordance with Shariah principles and complied with applicable guidelines, rulings and decisions issued by the Securities Commission pertaining to Shariah matters for the six months financial period ended 31 December In addition, we also confirm that the investment portfolio of Manulife Investment Syariah Index Fund comprises securities which 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 MUHAMMAD KHAIRULNIZAM BIN ALIAS Consultant (Shariah)/ Designated Person Responsible for Shariah Advisory Kuala Lumpur 14 February

15 7 STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER 2017 INVESTMENT INCOME Note Profit income 25,218 32,481 Gross dividend income 852, ,317 Net gain/(loss) on financial assets at fair value through profit or loss 6 2,131,958 (322,470) RM RM 3,010, ,328 EXPENSES Manager s fee 3 450, ,298 Trustee s fee 4 24,004 29,669 Auditors remuneration 2,773 2,828 Tax agent s fee 1,361 2,861 Other expenses 44,657 50,542 Transaction costs 62,975 17, , ,105 PROFIT/(LOSS) BEFORE TAXATION 2,424,249 (17,777) TAXATION 5 (619) (908) PROFIT/(LOSS) AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME/(LOSS) 2,423,630 (18,685) Profit/(Loss) after taxation is made up as follows: Realised 2,623, ,160 Unrealised (200,325) (942,845) 2,423,630 (18,685) 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 DECEMBER 2017 MANULIFE INVESTMENT ASSETS Current assets Note RM RM Financial assets at fair value through profit or loss 6 53,184,162 68,193,448 Amount due from Manager - 260,385 Amount due from stockbrokers 1,208,780 - Dividends receivable 244, ,265 Tax recoverable 26,750 26,750 Cash and cash equivalents 7 1,231,765 1,799,022 TOTAL ASSETS 55,895,784 70,476,870 LIABILITIES Current liabilities Amount due to Manager - Manager s fee 69,474 89,016 - Cancellation of units 1,104,541 - Amount due to Trustee 3,705 4,747 Other payables 8 21,648 32,313 TOTAL LIABILITIES 1,199, ,076 NET ASSETS VALUE ( NAV ) OF THE FUND 54,696,416 70,350,794 EQUITY Unit holders capital 38,608,663 59,349,835 Retained earnings 16,087,753 11,000,959 54,696,416 70,350,794 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 2 54,696,416 70,350,794 NUMBER OF UNITS IN CIRCULATION 10 78,078, ,818,000 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 DECEMBER 2017 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 JULY ,943,302 13,664,123 67,607,425 Movement in unit holders contribution: Creation of units 525, ,414 Cancellation of units (15,860,053) - (15,860,053) Total comprehensive income - 2,423,630 2,423,630 BALANCE AS AT 31 DECEMBER ,608,663 16,087,753 54,696,416 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 JULY ,678,314 11,019,644 76,697,958 Movement in unit holders contribution: Creation of units 5,537,013-5,537,013 Cancellation of units (11,865,492) - (11,865,492) Total comprehensive loss - (18,685) (18,685) BALANCE AS AT 31 DECEMBER ,349,835 11,000,959 70,350,794 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 DECEMBER 2017 Note RM RM CASH FLOWS FROM OPERATING ACTIVITIES Purchase of Shariah-compliant investments (4,462,622) (2,995,422) Sale of Shariah-compliant investments 17,736,189 6,837,031 Dividends received 743, ,353 Profit income received 25,218 32,503 Manager s fee paid (463,889) (592,664) Trustee s fee paid (24,741) (32,109) Audit fee paid (5,940) - Tax agent s fee paid - (4,468) Payment for other fees and expenses (110,793) (14,762) Net cash generated from operating activities 13,437,080 4,208,462 CASH FLOWS FROM FINANCING ACTIVITIES Distribution paid (2,340,912) (4,391,920) Proceeds from creation of units 2,905,721 10,279,696 Payments for cancellation of units (14,835,972) (12,133,071) Net cash used in financing activities (14,271,163) (6,245,295) Net decrease in cash and cash equivalents (834,083) (2,036,833) Cash and cash equivalents at beginning of the financial period 2,065,848 3,835,855 Cash and cash equivalents at end of the financial period 7 1,231,765 1,799,022 Cash and cash equivalents comprise: Islamic deposits with licensed financial institutions 1,162,316 1,763,453 Bank balance in a licensed bank 69,449 35, ,231,765 1,799,022 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 DECEMBER 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 December The Fund has applied the following amendments for the first time for the financial year beginning 1 January 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 adoption of the Amendments to MFRS 107 has required additional disclosure of changes in liabilities arising from financing activities. Other than that, the adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. Financial year beginning on/after 1 January 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. 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 equity 1 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 instrument 2 is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest 3. 16

20 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 standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. 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. 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 peformance evaluated on a fair value basis. The Fund designates its investment in quoted Shariah-compliant investments 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, amount due from stockbrokers, dividends receivable, 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. (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. 17

21 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 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. 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 institutions is recognised on an accrual basis using the effective profit rate method. Dividend income on quoted Shariah-compliant investments is recognised on the ex-dividend date. Realised gains or losses on sale of quoted Shariah-compliant investments are accounted for as the difference between the net disposal proceeds and the carrying amount of the Shariahcompliant investments, determined on a weighted average cost basis. 18

22 E EXPENSES Expenses are accounted for on an accrual basis and charged to the statement of comprehensive income. Expenses arising from the disposal of investments are recognised as transaction costs (Note J to the financial statements). F AMOUNT DUE FROM /TO STOCKBROKERS Amount due from and to stockbrokers represent receivables for Shariah-compliant securities sold and payables for Shariah-compliant securities purchased that have been contracted for but not yet settled or delivered on the statement of financial position date respectively. These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment for amount due from stockbrokers. A provision for impairment of amount due from a stockbroker is established when there is objective evidence that the Fund will not be able to collect the amount due from the relevant stockbroker. Significant financial difficulties of the stockbroker, probability that the stockbroker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from the stockbroker is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest to discount the future cash flows for the purpose of measuring the impairment loss. The effective profit rate method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the profit income or profit expense over the relevant period. The effective profit rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective profit rate, the Fund estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective profit rate, transaction costs and all other premiums or discounts. G CASH AND CASH EQUIVALENTS For the purpose of statement of cash flows, cash and cash equivalents comprise bank balances 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. H 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. 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. 19

23 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) Quoted Shariah-compliant investments The estimated fair value is based on quoted and observable market prices. (c) Other short-term financial instruments Other short-term financial instruments comprise amount due from/to Manager, amount due/to stockbrokers, dividends receivable, 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. I 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. J 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. K TRANSACTION COSTS Transaction costs are costs incurred to acquire or dispose of financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. 20

24 12 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 31 DECEMBER INFORMATION ON THE FUND Manulife Investment Syariah Index Fund ( the Fund ) was established pursuant to a Master Deed dated 26 December 2002, as amended and supplemented by subsequent Supplemental Deeds (hereinafter referred to as the Deed ) between Manulife Asset Management Services Berhad ( the Manager ) and Maybank Trustees Berhad ( the Trustee ). The principal activity of the Fund is to invest in Investments as defined under Clause 1 of the Deed, which includes Shariah-compliant stocks and securities of companies listed on Bursa Malaysia Berhad, unquoted sukuk and short-term Islamic money market investments. The Fund commenced operations on 4 January 2002 and will continue its operations until terminated as provided under Clause 12 of the Deed. The main objective of the Fund is to track the performance of the FBMSHA. The Fund also aims to generate annual distribution. 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 14 February 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 1.50% 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 0.08% 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, subject to a minimum fee of RM18,000 per annum. 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/(Loss) before taxation 2,424,249 (17,777) Tax calculated at Malaysian tax rate of 24% (2016: 24%) 581,820 (4,266) Tax effect in respect of: - Expenses not deductible for tax purposes 30,560 22,105 - Restriction on tax deductible expenses for unit trust funds 110, ,320 - Investment income not subject to tax (720,937) (151,980) - Investment income subject to different tax rate (866) (1,271) Tax expenses FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS RM RM Designated at fair value through profit or loss - Quoted Shariah-compliant investments 53,184,162 68,193,448 Net gain/(loss) on financial assets at fair value through profit or loss Realised 2,332, ,375 - Unrealised (200,324) (942,845) RM RM 2,131,958 (322,470) 22

26 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED SHARIAH- COMPLIANT INVESTMENTS Quantity MAIN MARKET Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund RM RM RM % CONSTRUCTION Econpile Holdings Berhad 49,250 49,447 59, Ekovest Berhad 121, , , Gadang Holdings Berhad 56,750 49,817 62, Gamuda Berhad 260,500 1,066,991 1,292, IJM Corporation Berhad 381,520 1,159,291 1,163, Jaks Resources Berhad 50,100 74,879 74, Kerjaya Prospek Group Berhad 18,500 55,430 75, Muhibbah Engineering (M) Berhad 44, , , Sunway Construction Group Berhad 62, , , WCE Holdings Berhad 51,300 60,734 61, WCT Holdings Berhad 139, , , ,235,706 3,172,530 3,410, CONSUMER PRODUCTS Fraser & Neave Holdings Berhad 12, , , Hong Leong Industries Berhad 10,200 85,950 98, Kawan Food Berhad 19,000 52,025 55, Nestle (Malaysia) Berhad 7, , , Padini Holdings Berhad 44,800 69, , PPB Group Berhad 67,800 1,082,233 1,168, UMW Holdings Berhad 78, , , ,300 2,889,952 3,077, FINANCE Syarikat Takaful Malaysia Berhad 39,500 90, , INDUSTRIAL PRODUCTS Ann Joo Resources Berhad 22,800 69,996 88, Cahya Mata Sarawak Berhad 68, , , DRB-HICOM Berhad 105, , , Hartalega Holdings Berhad 87, , , Hiap Teck Venture Berhad 120,500 48,200 49, Hibiscus Petroleum Berhad 139,100 59, , Kossan Rubber Industries Berhad 40, , ,

27 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED SHARIAH- COMPLIANT INVESTMENTS Quantity Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund RM RM RM % INDUSTRIAL PRODUCTS (CONTINUED) Lafarge Malaysia Berhad 49, , , Lotte Chemical Titan Holding Brhad 71, , , Lion Industries Corporation Berhad 51,000 58,650 72, Petronas Chemical Group Berhad 340,900 2,150,757 2,624, Petronas Gas Berhad 92,900 1,559,312 1,623, Petron Malaysia Refining & Marketing Berhad 9,500 39, , Press Metal Berhad 208, ,397 1,125, Scientex Incorporated Berhad 23,400 69, , SKP Resources Berhad 62,500 64, , Supermax Corporation Berhad 54, , , Ta Ann Holdings Berhad 27,500 92, , Top Glove Corporation Berhad 100, , , Uchi Technologies Berhad 33,210 49, , V.S. Industry Berhad 102,800 97, , Wah Seong Corporation Berhad 46,100 53,587 51, ,856,990 6,653,616 10,020, INFRASTRUCTURE PROJECT COMPANIES Lingkaran Trans Kota Holdings Berhad 24, , , Time Dotcom Berhad 36, , , , , , PLANTATION Felda Global Ventures Holding Berhad 229, , , Genting Plantations Berhad 44, , , IOI Corporation Berhad 389,500 1,641,295 1,768, Jaya Tiasa Holdings Berhad 96, , , Kuala Lumpur Kepong Berhad 55,900 1,119,366 1,397, Sime Darby Plantation Berhad 423,541 2,276,972 2,541, ,240,541 6,341,674 6,671,

28 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED SHARIAH- COMPLIANT INVESTMENTS Quantity Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund RM RM RM % PROPERTY Eastern & Oriental Berhad 104, , , Eco World Development Group Berhad 113, , , IOI Properties Group Berhad 229, , , Iskandar Waterfront City Berhad 65,100 87,234 93, KSL Holdings Berhad 64, ,392 69, LBS Bina Group Berhad 36,600 57,374 86, Matrix Concepts Holdings Berhad 32,437 65,123 71, MKH Berhad 28,680 91,092 46, Malaysian Resources Corporation Berhad 265, , , Sime Darby Property Berhad 434, , , SP Setia Berhad 135, , , UEM Sunrise Berhad 189, , , UOA Development Berhad 72, , , ,772,359 3,237,840 3,079, ISLAMIC REAL ESTATE INVESTMENT TRUSTS (i-reits) KLCC Real Estate Investment Trust 53, , , TECHNOLOGY D&O Green Technologies Berhad 73,100 50,146 54, Globetronic Technology Berhad 21,200 69, , Inari Amertron Berhad 159, , , Malaysian Pacific Industries Berhad 11,300 64, , Pentamaster Corporation Berhad 37,584 64, , Unisem (Malaysia) Berhad 59,600 90, , , ,898 1,211, TRADING/SERVICES AirAsia X Berhad 225,500 75,543 74, Axiata Group Berhad 544,034 2,813,340 2,986, Berjaya Auto Berhad 79, , , Borneo Oil Berhad 578,850 57,885 49, CY Park Resources Berhad 23,400 44,525 55, Dialog Group Berhad 550, ,216 1,382, Datasonic Group Berhad 72,700 77,247 84,

29 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED SHARIAH- COMPLIANT INVESTMENTS Quantity Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund RM RM RM % TRADING/SERVICES Frontken Corporation Berhad 115,400 50,995 53, Gas Malaysia Berhad 56, , , George Kent (M) Berhad 43, , , IHH Healthcare Berhad 333,800 1,563,373 1,956, KPJ Healthcare Berhad 280, , , Malakoff Corporation Berhad 313, , , Maxis Berhad 328,300 2,012,013 1,973, Mega First Corporation 33, , , MISC Berhad 172,200 1,082,643 1,277, MMC Corporation Berhad 104, , , MY E.G Services Berhad 262, , , OldTown Berhad 29,400 90,825 90, Pestech International Berhad 43,700 54,529 76, Petronas Dagangan Berhad 34, , , POS Malaysia Berhad 43, , , Prestariang Berhad 44, ,042 67, Sapura Energy Berhad 583,800 1,182, , Serba Dinamik Holdings Berhad 58, , , Sime Darby Berhad 420, , , Sunway Berhad 170, , , Tenaga Nasional Berhad 476,650 4,702,467 7,273, Telekom Malaysia Berhad 238,054 1,159,897 1,499, UMW Oil & Gas Corporation Berhad 444, , , Wesports Holdings Berhad 130, , , Yinson Holdings Berhad 58, , , ,896,180 20,312,688 24,631, WARRANTS Econpile Holdings Berhad 9, TOTAL QUOTED SHARIAH- COMPLIANT INVESTMENTS 13,768,860 43,695,760 53,184, ACCUMULATED UNREALISED GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 9,488,402 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 53,184,162 26

30 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED SHARIAH- COMPLIANT INVESTMENTS Quantity Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % MAIN MARKET CONSTRUCTION Ekovest Berhad 62, , , Gadang Holdings Berhad 72,250 63,424 75, Gamuda Berhad 371,900 1,470,604 1,777, Hock Seng Lee Berhad 43,900 74,191 70, IJM Corporation Berhad 544,620 1,628,147 1,742, Mitrajaya Holdings Berhad 82, , , Muhibbah Engineering (M) Berhad 66, , , WCT Holdings Berhad 174, , , ,418,193 4,041,648 4,368, CONSUMER PRODUCTS Fraser & Neave Holdings Berhad 17, , , Hong Leong Industries Berhad 13, , , Kawan Food Berhad 18,800 68,637 71, Lii Hen Industried Berhad 19,600 63,071 62, Magni-Tech Industries Berhad 11,400 50,082 47, Padini Holdings Berhad 67, , , Poh Huat Resources Holdings Berhad 39,200 77,910 67, PPB Group Berhad 103,100 1,635,713 1,635, QL Resources Berhad 99, , , UMW Holdings Berhad 116, , , ,340 3,754,377 3,564, FINANCE Syarikat Takaful Malaysia Berhad 59, , , INDUSTRIAL PRODUCTS Cahya Mata Sarawak Berhad 94, , , Coastal Contracts Berhad 40, ,018 56, CSC Steel Holdings Berhad 35,400 74,315 76, DRB-HICOM Berhad 153, , ,