SHARIAH PROGRESS FUND

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2 CONTENTS PAGE 1 General Information 1 2 Manager s Report 3 3 Policy On Stockbroking Rebates And Soft Commissions 9 4 Statement By The Manager 10 5 Trustee s Report 11 6 Shariah Adviser s Report 12 7 Independent Auditors Report 13 8 Statement Of Comprehensive Income 16 9 Statement Of Financial Position Statement Of Changes In Equity Statement Of Cash Flows Summary Of Significant Accounting Policies Notes To The Financial Statements Corporate Information 42 i

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4 MANULIFE INVESTMENT SHARIAH PROGRESS FUND 1 GENERAL INFORMATION 1.1 THE TRUST The Fund commenced operations on 20 April 2011 and will continue its operations until terminated as provided under Clause 12 of the Deed. 1.2 FUND TYPE / CATEGORY Small-cap /Islamic Equity 1.3 OBJECTIVE OF THE FUND To provide Unit Holders with steady long-term capital growth at a reasonable level of risk by investing in a diversified portfolio of small- to medium-capitalised Shariah-compliant equities and equity-related instruments. Note: Any material changes to the Fund s investment objective would require Unit Holders approval. 1.4 DISTRIBUTION POLICY Incidental 1.5 PERFORMANCE BENCHMARK The performance of the Fund is measured against the Manulife Investment Shariah Progress Index comprising 50% FTSE Bursa Malaysia Small Cap Index + 50% FTSE Bursa Malaysia Mid 70 Index. As there are no direct indices to track the similar strategy that the Fund intends to employ, a composite benchmark of the underlying exposures of the Fund is chosen as the Fund s benchmark. The Fund s strategy of focusing the investable universe to those Shariahcompliant stocks which are not part of the largest 30 companies by market capitalisation in the FTSE Bursa Malaysia Emas Index is not represented by any single index available at the current moment. As such, the composite benchmark chosen would be a better representation of the Fund s strategy and expected effective exposure over the long term. The risk profile of the Fund is different from the risk profile of the benchmark. 1.6 INVESTMENT STYLE AND STRATEGY Identifying Malaysia companies with strong growth potential The Fund invests in a diversified portfolio of small- to medium-size Malaysia equities which comply with Shariah requirements. The fundamental investment process is geared towards identifying and investing mainly in growth companies listed in Bursa Malaysia which are not part of the FTSE Bursa Malaysia FBM KLCI Index (FBM KLCI) constituents (at the point of purchase). This strategy focuses the Fund Manager s investable universe to those Shariah-compliant stocks which are not part of the largest 30 companies by market capitalisation in the FTSE Bursa Malaysia Emas Index. The Fund Manager believes that such companies would have the potential to achieve strong rates of growth, as well as key investment and sectorial themes prevailing in the market at any period in time. While such companies are normally associated with higher risks, the potential returns could also be very rewarding, if the right companies are selected. 1

5 The Fund Manager believes that there are Shariah-compliant securities of companies in Malaysia that are not well followed by the investment community, but have the potential to develop into future industry leaders. Such companies could be involved in manufacturing, services or trading businesses that have not just Malaysia, but the whole world as their marketplace. These companies could also be providing supporting roles to multinationals and larger companies domestically and globally. The Fund Manager believes that these companies if in the right businesses and managed by competent management, generally have higher earnings potential that may translate to better returns for investors. The better returns could also come from higher valuations being accorded to these companies as they start gaining attention from the broader investment community both domestically and foreign. The Fund Manager dedicates resources through primary research including company visits and developing earnings models in search of these companies. Fundamental analysis is conducted to determine the attractiveness of specific Shariah-compliant stock ideas and/ or sectorial themes. This analysis takes into account information gathered during company visits, key earnings drivers and earnings revision trends for the company, valuation relative to the Fund Manager s estimates of intrinsic value as well as the competency of its management. Various tools are used to facilitate the valuation process, including price over earnings ratio, the discounted cash flow model and enterprise value over earnings before interest, depreciation and taxation. The Fund also favours companies that practise good corporate governance as they generally command higher market valuation and potentially better returns for investors over a medium investment horizon. Whilst the investment process is driven by key investment and sectorial themes prevailing in the market at any period of time, the guiding principle to the selection of investments is premised on compliance with the Shariah requirements. In addition, any active and frequent trading strategy will depend on investment opportunities or valuations. Temporary Defensive Strategy Under adverse market conditions (due to economic, political or any other negative conditions for investments), the Fund Manager may take temporary defensive positions that may be inconsistent with the Fund s principal strategy in attempting to respond to such conditions. Under such situations, a large proportion of the Fund may be temporarily invested in Islamic deposits and shorter term Islamic money market instruments. During the financial year under review, the Manager was focused on bottoms up Shariahcompliant stock selection. The Shariah-compliant stocks were chosen based on a set of important criteria: firstly quality management with a clear and established track record. Secondly, the Manager was looking for a sustainable business model that would be able to deliver growth even in a volatile macroeconomic environment. Thirdly, the Manager paid close attention to the selected company s financials, in particular its balance sheet and cash flow. Highly leveraged companies with poor cash flows were quickly discarded. Fourthly, the Manager considered the valuation of the company. At all times, the Manager favoured companies which practiced good corporate governance, with a high degree of transparency and disclosure In keeping with the mandate of the Fund, the Manager was highly flexible in terms of its asset allocation. May 2017 April 2018 was both challenging as well as fruitful period in particular during May Oct 2017, due to a couple of factors, 1) Stable oil prices at USD 50 per barrel, 2) Flush of foreign funds entering the Malaysian market both on Morgan Stanley and Credit Suisse upgrading Malaysia. All this prompted the Manager to maintain cash levels to 15%-20% in May The Manager remained alert to not chasing all Shariah-compliant stocks and selectively placing higher weightage on Shariah-compliant stocks that would give higher returns which led to increased Shariah-compliant equity weighting from May onwards. The asset allocation flexibility remains one of the key strengths of the Fund. However Nov 2017 April 2018 was challenging period given the weak USD which hurt exporters, Trump trade wars and higher global interest rate environments; which saw a global selldown in Technology stocks as well as trade impacts between China and USA which also saw global risk off in Emerging Markets. 2

6 2 MANAGER S REPORT 2.1 FUND PERFORMANCE MANULIFE INVESTMENT For the financial year ended 30 April 2018, the Fund s return decreased by 0.77% The Fund outperformed its benchmark return, MSPI which decreased by 7.95%. The outperformance was due to the higher cash levels employed throughout the later 4 months of the year under review coupled with consistent injections in Dec 2017 April The Fund reduced its weight in the Manufacturing, Tech and Construction sector in the last 4 months of the period, with the USD weakening early, domestic focused companies started to perform on lower import costs. Winners for the portfolio during the period included Dialog (+62%), F&N (+49%), Gabungan AQRS (+18%), and HSS (+86%). Apart from the Shariah-compliant stock selection, the Manager s agility in managing the asset allocation also helped performance. The distribution of 2.30sen per unit on 25 April 2018 had the effect of reducing the NAV per unit of the Fund, and the ex-distribution NAV per unit was RM The graph below compares the 12-month performance of the Fund against its benchmark return: 15% 10% 5% 0% -5% -10% -15% Apr 17 May 17 Fund Performance vs. Benchmark Index Return Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Manulife Investment Shariah Progress Fund Return Benchmark Index Return Mar 18 Apr 18 Source: Bloomberg & Lipper Fund Size The Fund s total NAV increased to RM454.22mil from RM384.25mil during the financial year under review. 3

7 Fund s Returns (a) The graph below compares the performance of the Fund against its benchmark return since the Fund s commencement : 150% 130% 110% 90% 70% 50% 30% 10% -30% 0% Apr 11 Fund Performance vs. Benchmark Index Return Apr 12 Apr 13 Apr 14 Apr 15 Apr 16 Manulife Investment Shariah Progress Fund Return Benchmark Index Return Apr 17 Apr 18 Source: Bloomberg & Lipper (b) Average Total Return of the Fund: For the financial year ended 30 April 2018 Fund (% p.a.) MSPI (% p.a.) 1 year (0.77) (7.95) 3 year Year Commencement Date: 20 April 2011 Source: Bloomberg & Lipper (c) Annual Total Return of the Fund: For the financial year ended: Fund (% p.a.) MSPI (% p.a.) 30 April 2018 (0.77) (7.95) 30 April April 2016 (4.73) (5.62) 30 April (4.15) 30 April Commencement Date: 20 April 2011 Source: Bloomberg & Lipper The Fund has achieved its objective of outperforming the benchmark during the financial year under review. 4

8 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 The total Fund s return comprises both NAV return and income return. The returns can be calculated based on the computation methods as follows: Total Fund s Return = [(NAV Return*Series of Income Return) 1] x 100% NAV Return = {[End NAV (Ex-distribution)/Beginning NAV]-1} x 100% Income Return = (Gross Distribution / Ex-NAV price) x 100% Average Total Return = (NAV Return*Series of Income Return) (365.25/n) x , where n = number of days between beginning and end dates. The following table shows other financial and performance data of the Fund for the past three financial years: Fund Data 30 April April April 2016 NAV (RM) 454,215, ,245, ,276,018 Units in Circulation ( 000) 1,267, , ,099 NAV (RM per unit) Highest / Lowest NAV (RM per unit) Total Fund Return (%) NAV Return (%) Income Return (%) Final Distribution Gross (RM) Net (RM) Ex-Date / (0.77) (6.81) / / (4.73) (11.54) Management Expenses Ratio (%) Portfolio Turnover Ratio (times)

9 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 year is higher than the previous financial year mainly due to increase in expenses incurred. (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 the 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 year is lower than the previous financial year mainly due to the increase in average NAV. Impact on NAV arising from distribution distributed for the last three financial years: Cum date Details 25 April April April 2016 NAV before distribution (RM per unit) Less: Distribution (RM per unit) (0.0230) (0.0285) (0.0280) NAV after distribution (RM per unit) 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. 6

10 2.2 ASSET ALLOCATION Asset allocation for the past three financial years: Sector Allocation % of Net Asset Value 30 April April April 2016 Industrial Products Trading/Services Construction Technology Consumer Products Properties Plantation Warrants/ TSR Infrastructure Project Companies Finance Islamic Real Estate Investment Trusts (i-reits) Total Shariah-compliant Investments Islamic deposits with Licensed Financial Institutions Other Assets & Liabilities (0.21) (1.21) (43.67) As at 30 April 2018, the Fund was 73.73% invested in Shariah-compliant equities, a decrease from 79.17% at the end of April This was due to the steady injection during the month coupled with promising market outlook and raising cash levels from decreasing exposure from Exporters and Construction on local General Election fears. The Fund has been deploying cash and adding positions in the exporters such as Manufacturers, Technology and Construction to take advantage of the appreciating USD and construction awards given out by the government on LRT3 and MRT2 from May 2017 till November 2017, but subsequently raised cash levels. The Manager notes that Malaysia is at risk both from domestic and external pressures and will redeploy cash in a gradual manner 2.3 MARKET REVIEW During the financial year under review (1st May th April 2018) the FBM Small cap Shariah Index declined 20.71%, underperforming the FBM KLCI which gained by 5.28%. The underperformance of the Shariah Small Cap index vs. the FBM KLCI can be attributed to the former s higher weighting towards Technology, Manufacturers as well as smaller Construction companies which underperformed during the period. 7

11 2.4 MARKET OUTLOOK AND INVESTMENT STRATEGY The FBM KLCI rose steadily from 1,778 pts on 1st May 2017 to 1,747 pts as at 31 October 2017 (-1.72%). In 2H17, the Malaysian market traded rangebound on the back of poor earnings season and gradual foreign funds outflow. But the improved global market sentiment helped in sustaining the market. So far, 2017 has been a much better year than 2016, broadly in line with expectations. The stronger gross domestic product (GDP) growth, improving corporate earnings prospects, and positive sentiment in the global market. These more than offset concerns over uncertain global developments. However, starting in 2018, markets were hit on Trump trade wars with China, rising interest rate environment and USD weakness, which saw emerging markets suffering from the weak currency impact. The December and February quarter reporting season was relatively unexciting, as earnings revisions remained negative. However we saw more upside surprises and, consequently, the misses-to-beats ratio moved lower for the second consecutive quarter. Importantly, the market earning per share (EPS) growth forecasts for 2018 and 2019 were relatively intact, at +7.4% and +7.0% respectively. Anecdotal evidence suggests that 14th General Election (GE 14) risk is compelling consumers and business owners to adopt a wait-andsee approach, although we expect this caution to fade post-ge14, assuming there are no unexpected outcomes. Notwithstanding the market s adaptation to the rising interest rate environment, the positive underlying macroeconomic growth momentum should continue to provide a positive backdrop for domestic equities. We make no change to our end-2018 FBM KLCI target of 1,860 pts (16x 2019 earnings). Investors should look for opportunities to accumulate at lower levels, and we continue to favour cyclical sectors that can benefit from macroeconomic tailwinds. The key risk for Malaysia in the near term is the GE 14 being held on 9th May, which if incumbent government remains in power, things will go back to business as usual, but if there should be opposition win, Malaysia markets will likely see a selldown before picking up again, on delays in policies, reviews on construction jobs awarded and more. The Ringgit (MYR) will likely weaken slightly but is expected to be stable. Oil Prices will also ultimately provide stability for Malaysia in terms of revenue. 2.5 BREAKDOWN OF UNIT HOLDINGS BY SIZE AS AT 30 APRIL 2018 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 3, , ,001 to 10,000 2, , ,001 to 50,000 7, , ,001 to 500,000 5, , Above 500, , Manager s stock - - 6, Total 19, ,267,

12 3 POLICY ON STOCKBROKING REBATES AND SOFT COMMISSIONS The Management Company did not retain any rebates. Goods and services (soft commissions) may be retained by the Manager or its Fund Manager if the goods and services are of demonstrable benefits to unit holders, and dealings with the brokers/dealers are executed on terms which are the best available to the Fund. The Manager and its Fund Manager have subscribed but are not limited to the following goods and services which are demonstrably beneficial to unit holders such as Bloomberg, Bond web, and independent research publications and tools such as ISI and Valutrac. The Manager and its Fund Manager did not receive any soft commissions. 9

13 4 STATEMENT BY THE MANAGER We, Edmond Cheah Swee Leng and Chong Soon Min, being two of the Directors of Manulife Asset Management Services Berhad, do hereby state that, in the opinion of the Manager, the accompanying 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 30 April 2018 and of its financial performance, changes in equity and cash flows of the Fund for the financial year ended 30 April 2018 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 EDMOND CHEAH SWEE LENG Director CHONG SOON MIN Director Kuala Lumpur 28 June

14 5 TRUSTEE S REPORT MANULIFE INVESTMENT TO THE UNIT HOLDERS OF MANULIFE INVESTMENT We have acted as Trustee of Manulife Investment Shariah Progress Fund ( the Fund ) for the financial year ended 30 April In our opinion and to the best of our knowledge, Manulife Asset Management Services Berhad ( the Manager ), has operated and managed the Fund in accordance with the following:- a) Limitations imposed on the investment powers of the Manager 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; b) Valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; c) Creation and cancellation of units is carried out in accordance with the Deeds and any regulatory requirements. d) The distribtion of 2.30 sen (gross) per unit to the unit holders for the financial year ended 30 April 2018 are consistent with the objective of the Fund. For and on behalf of RHB Trustees Berhad (Company No.: U) LEE YIT CHENG Head, Group Int'l Ops Support & Trustee Ops MOHD SOFIAN BIN KAMARUDDIN Vice President Kuala Lumpur 28 June

15 6 SHARIAH ADVISER S REPORT TO THE UNIT HOLDERS OF MANULIFE INVESTMENT We have acted as the Shariah Adviser of Manulife Investment Shariah Progress 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 Shariah Progress Fund in accordance with Shariah principles and complied with applicable guidelines, rulings and decisions issued by the Securities Commission pertaining to Shariah matters for the financial year ended 30 April In addition, we also confirm that the investment portfolio of Manulife Investment Shariah Progress Fund comprises securities which have been classified as Shariah-compliant by the Shariah Advisory Council of the Securities Commission ( SACSC ). As for the securities which are not certified by the SACSC, we have reviewed the said securities and opined that these securities are designated as Shariah-compliant. For and on behalf of the Shariah Adviser IBFIM MUHAMMAD KHAIRULNIZAM BIN ALIAS Consultant (Shariah)/Designated Person Responsible for Shariah Advisory Kuala Lumpur 28 June

16 7 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF MANULIFE INVESTMENT SHARIAH PROGRESS FUND REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Our opinion In our opinion, the financial statements of Manulife Investment Shariah Progress Fund ("the Fund") give a true and fair view of the financial position of the Fund as at 30 April 2018, and of its financial performance and its cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. What we have audited We have audited the financial statements of the Fund which comprise the statement of financial position as at 30 April 2018,and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 16 to 41. 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 Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Information other than the financial statements and auditors report thereon The Manager of the Fund are responsible for the other information. The other information comprises Manager s report but does not include the financial statements of the Fund and our auditors report thereon. Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 13

17 Responsibilities of the Manager for the financial statements The Manager of the Fund is responsible for the preparation of the financial statements of the Fund that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determine is necessary to enable the preparation of financial statements of the Fund that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Fund, the Manager is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to a going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or has no realistic alternative but to do so. Auditors responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund 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. 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: (a) Identify and assess the risks of material misstatement of the financial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (b) 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 Fund s internal control. (c) (d) (e) 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 Fund'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 Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements 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. 14

18 OTHER MATTERS This report is made solely to the unit holders of the Fund and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS PLT (No. LLP & AF 1146) Chartered Accountants Kuala Lumpur 28 June

19 8 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 APRIL 2018 INVESTMENT INCOME Note Profit income 2,799,461 2,329,239 Gross dividend income 9,857,004 5,713,903 Net (loss)/gain on financial assets at fair value through profit or loss 6 (12,572,521) 38,060,735 RM RM 83,944 46,103,877 EXPENSES Manager s fee 3 6,977,885 3,939,632 Trustee s fee 4 372, ,114 Auditors remuneration 5,500 5,610 Tax agent s fee 2,700 2,700 Other expenses 730, ,705 Transaction costs 1,800,175 1,378,626 9,888,840 5,952,387 (LOSS)/PROFIT BEFORE TAXATION (9,804,896) 40,151,490 TAXATION 5 (44,231) (18,685) (LOSS)/PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE (LOSS)/PROFIT (9,849,127) 40,132,805 (Loss)/profit after taxation is made up as follows: Realised 30,764,765 (5,465,648) Unrealised (40,613,892) 45,598,453 (9,849,127) 40,132,805 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 16

20 9 STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 2018 ASSETS Note RM RM Financial assets at fair value through profit or loss 6 335,000, ,203,661 Amount due from Manager 28,825,069 37,728,970 Amount due from stockbrokers 118,436 - Dividends receivable - 118,240 Tax recoverable 30,303 30,303 Cash and cash equivalents 7 120,470,900 84,704,650 TOTAL ASSETS 484,445, ,785,824 LIABILITIES Amount due to Manager - Manager s fee 548, ,272 - Cancellation of units 749,427 - Amount due to Trustee 29,244 23,482 Amount due to stockbrokers 1,543,858 15,969,312 Other payables 8 58,043 42,254 Distribution payable 27,300,747 26,064,647 TOTAL LIABILITIES 30,229,650 42,539,967 NET ASSET VALUE ( NAV ) OF THE FUND 454,215, ,245,857 EQUITY Unit holders capital 405,833, ,284,282 Retained earnings 48,382,374 60,961, ,215, ,245,857 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 2 454,215, ,245,857 NUMBER OF UNITS IN CIRCULATION 10 1,267,509, ,149,000 NAV PER UNIT The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 17

21 10 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 APRIL 2018 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 MAY ,284,282 60,961, ,245,857 Movement in unit holders contribution: Creation of units arising from applications 283,526, ,526,125 Creation of units arising from distribution 27,300,747-27,300,747 Cancellation of units (203,707,020) - (203,707,020) Total comprehensive loss - (9,849,127) (9,849,127) Distribution (Note 16) (24,570,673) (2,730,074) (27,300,747) BALANCE AS AT 30 APRIL ,833,461 48,382, ,215,835 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 MAY ,760,231 19,515, ,276,018 Movement in unit holders contribution: Creation of units arising from applications 390,762, ,762,195 Creation of units arising from distribution 26,064,647-26,064,647 Cancellation of units (206,925,161) - (206,925,161) Total comprehensive loss - 40,132,805 40,132,805 Distribution (Note 16) (27,377,630) 1,312,983 (26,064,647) BALANCE AS AT 30 APRIL ,284,282 60,961, ,245,857 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 18

22 11 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 APRIL 2018 Note RM RM CASH FLOWS FROM OPERATING ACTIVITIES Purchase of Shariah-compliant investments (333,803,003) (256,922,336) Sale of Shariah-compliant investments 274,089, ,555,860 Dividends received 9,931,013 5,630,806 Profit income received 2,799,461 2,329,239 Manager s fee paid (6,869,826) (3,794,425) Trustee s fee paid (366,392) (202,368) Audit fee paid (6,296) (5,500) Tax agent s fee paid (2,860) (2,700) Payment for other fees and expenses (713,680) (411,610) Tax refund received - 32,392 Net cash used in from operating activities (54,942,283) (70,790,642) CASH FLOWS FROM FINANCING ACTIVITIES Distribution paid (26,064,647) (13,075,692) Proceeds from creation of units 319,730, ,203,955 Payments for cancellation of units (202,957,593) (285,843,265) Net cash generated from financing activities 90,708,533 80,284,998 Net increase in cash and cash equivalents 35,766,250 9,494,356 Cash and cash equivalents at beginning of the financial year 84,704,650 75,210,294 Cash and cash equivalents at end of the financial year 7 120,470,900 84,704,650 Cash and cash equivalents comprise: Islamic deposits with licensed financial institutions 7 120,435,844 84,686,803 Bank balances in a licensed bank 7 35,056 17, ,470,900 84,704,650 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 19

23 12 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 30 APRIL 2018 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 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 Provider to exercise judgement in the process of applying the Fund s accounting policies. Although these estimates and judgement are based on the Provider 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 financial year ended 30 April The Fund has applied the following amendments for the first time for the financial period beginning 1 May 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 Amendment 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. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund's financial statements. Financial year beginning on/after 1 May 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 equity¹ instruments is always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument² is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest³. 20

24 For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded Shariah compliant 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 has reviewed its financial assets and liabilities and has assessed the following impacts from the adoption of the new standard as stated below: There will be no impact on the Fund s accounting for financial assets as the Fund s Shariahcompliant equity investments currently measured at fair value through profit or loss will continue to be measured on the same basis under MFRS 9. There will be no impact on the Fund s accounting for financial liabilities as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Fund does not have any such liabilities. The new impairment model requires the recognition of impairment provisions based on ECL rather than only incurred credit losses as is the case under MFRS 139. It applies to financial assets classified at amortised cost. Based on the assesments undertaken to date, the Fund does not expect any loss allowance to be recognised upon adoption of MFRS 9. 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 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, tax recoverable, cash and cash equivalents in the statement of financial position. 21

25 Other financial liabilities The Fund classifies amount due to Manager, amount due to Trustee, amount due fom stockbrokers, other payables and distribution payable 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. 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. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective profit rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If receivables has a variable profit rate, the discount rate for measuring any impairment loss is the current effective profit rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment is recognised (such as an improvement in the debtor s/issuer s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. 22

26 (v) De-recognition Financial assets are de-recognised when the rights to receive cash flows from the Shariahcompliant investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are de-recognised when they are extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or has expired. C CREATION AND CANCELLATION OF UNITS The Fund issues cancellable units, which are cancelled at the unit holder s option and are classified as equity. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s net asset value. The outstanding unit is carried at the redemption amount that is payable at the date of the statement of financial position if the unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at the unit holder s option at prices based on the Fund s net asset value per unit at the time of creation and cancellation. The Fund s net asset value is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. The net asset value per unit is computed each dealing day. The price at which units are created or cancelled is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day. Units in the Fund are classified as equity in the statement of financial position and are stated at fair value representing the price at which unit holders can redeem the units from the Fund. D INCOME RECOGNITION Profit income from Islamic deposits is recognised on an accrual basis using the effcetive 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 Shariahcompliant investments, determined on a weighted average cost basis. E EXPENSES Expenses are accounted for on an accrual basis and charged to the statement of comprehensive income. Expenses arising from the disposal of Shariah-compliant investments are recognised as transaction costs (Note L to the financial statements). F AMOUNT DUE FROM/TO STOCKBROKERS Amounts 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 profit rate method, less provision for impairment for amounts 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, profit income is recognised using the rate of profit to discount the future cash flows for the purpose of measuring the impairment loss. 23

27 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 cash at bank and Islamic deposits held in highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. H DISTRIBUTION A distribution to the Fund s unit holders is accounted for as a deduction from realised reserve. A proposed distribution to unit holders is recognised in the statement of changes in equity upon approval by the Trustee. Distribution equalisation is the amount attributable to net realised income that is included in the price of units created or units cancelled by the Fund during the reporting period. I 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 and 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. 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 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 by 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. 24