PHEIM Annual Report

31 DECEMBER 2017

PHEIM Annual Report 31.12.2017 TRUST DIRECTORY MANAGER Pheim Unit Trusts Berhad (545919-A) Registered Office and Head Office: 7th Floor, Menara Hap Seng (Letter Box 12) Jalan P. Ramlee, 50250 Kuala Lumpur Tel:(603) 2142 8888 Fax:(603) 2141 9199 BOARD OF DIRECTORS Dr. Tan Chong Koay (Non-independent) Azmi Malek Merican (Non-independent) (Resigned w.e.f. 25 July 2017) Leong Hoe Kit (Non-Independent) (Appointed w.e.f. 17 July 2017) Hoi Weng Kong (Independent) Lee Seng Young (Independent) Ahmad Subri Bin Abdullah (Independent) (Appointed w.e.f. 25 July 2017) INVESTMENT COMMITTEE Zarina Omar (Independent) Pee Ban Hock (Independent) Ho Sen Feek (Independent) Mark Wing Kong (Independent) Denys Antas (Independent) Ahmad Subri Bin Abdullah (Independent) (Appointed w.e.f. 25 July 2017) EXTERNAL INVESTMENT MANAGER Pheim Asset Management Sdn Bhd (269564-A) SHARIAH ADVISER IBFIM (763075-W) Amanie Advisors Sdn Bhd (684050-H) TRUSTEE Maybank Trustees Berhad (5004-P) AUDITORS Folks DFK & Co (AF0502) TAXATION CONSULTANT Folks Taxation Sdn Bhd (178104-M)

PHEIM Annual Report 31.12.2017 CONTENTS Page No 1. Fund Information 1-6 2. Fund Performance 7-21 3. Manager s Report 22-46 4. Trustee s Report, Statement by the Manger, Shariah Adviser s Report and Audited Financial Statements: Pheim Emerging Companies Balanced Fund 47-81 Dana Makmur Pheim 82-112 Pheim Income Fund 113-144 Pheim Asia Ex-Japan Fund 145-175 Pheim Asia Ex-Japan Islamic Fund 176-207

PHEIM Annual Report 31.12.2017 Fund Information Dear Valued Unit Holders We are pleased to present the Manager s Report and the audited financial statements for the financial period from 1 January 2017 to 31 December 2017 for the following funds: i. Pheim Emerging Companies Balanced Fund (PECBF) ii. iii. iv. Dana Makmur Pheim (DMP) Pheim Income Fund (PIF) Pheim Asia Ex-Japan Fund (PAXJ) v. Pheim Asia Ex-Japan Islamic Fund (PAXJI) 1 FUND INFOATION 1.1 Fund Category and Type Fund PECBF Category and type PECBF is a balanced fund that aims to provide income and some capital growth. DMP PIF PAXJ PAXJI DMP is an Islamic balanced fund that aims to provide Shariah permissible income and some capital growth. PIF is a bond fund that aims to provide steady income. PAXJ is an equity growth fund that aims to achieve capital appreciation in the long term by investing primarily in Asian markets excluding Japan. PAXJI is an equity growth fund that aims to achieve capital appreciation in the long term by investing primarily in Asian markets excluding Japan through investments that comply with Shariah requirements. 1.2 Funds Investment Objective and Strategy Fund PECBF Investment objective and strategy PECBF aims to provide Unit Holders with steady income and some prospects for capital appreciation (income and growth) in the longer term. PECBF will invest in a balanced portfolio of equities and fixed income instruments subject to a maximum of 60% in equities and a minimum of 40% in fixed income instruments and liquid assets. www.pheimunittrusts.com support@pheimunittrusts.com 1 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Information DMP PIF DMP aims to provide Unit Holders with steady income and some prospects for capital appreciation (income and growth) in the longer term. DMP will invest in a balanced portfolio of Shariah-compliant equities and sukuk subject to a maximum of 60% in Shariah-compliant equities and a minimum of 40% in sukuk and Islamic liquid assets. All investment will be made in accordance to Shariah requirements. PIF aims to provide unit holders with consistent income returns in the medium to longer term. PIF will invest primarily in medium to long-term fixed income instruments subject to a minimum of 80% in fixed income instruments and liquid assets and a maximum of 20% in equities. PAXJ PAXJ aims to achieve capital appreciation in the long term by investing primarily in Asian markets excluding Japan. PAXJ will invest, without restraint, in securities listed on the stock exchanges of the Asia Pacific region excluding Japan with initial focus in ASEAN countries, Hong Kong SAR, China, Taiwan, Korea, Australia, New Zealand and India. PAXJI PAXJI aims to achieve capital appreciation in the long term by investing primarily in Asian markets excluding Japan through investments that comply with Shariah requirements. PAXJI will invest in securities listed on the stock exchanges of the Asia Pacific region excluding Japan with initial focus in ASEAN countries, Hong Kong SAR, China, Taiwan, Korea, Australia, New Zealand and India that comply with Shariah requirements. 1.3 Duration of the Funds Fund PECBF Duration of the Fund PECBF was launched on 28 January 2002 and its offer period ended on 15 February 2002. It shall exist for as long as it appears to the Manager and the Trustee that it is in the interest of the Unit Holders for it to continue. DMP DMP was launched on 28 January 2002 and its offer period ended on 15 February 2002. It shall exist for as long as it appears to the Manager and the Trustee that it is in the interest of the Unit Holders for it to continue. PIF PIF was launched on 28 January 2002 and its offer period ended on 15 February 2002. It shall exist for as long as it appears to the Manager and the Trustee that it is in the interest of the Unit Holders for it to continue. www.pheimunittrusts.com support@pheimunittrusts.com 2 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Information PAXJ PAXJ was launched on 30 June 2006 and its offer period ended on 20 July 2006. It shall exist for as long as it appears to the Manager and the Trustee that it is in the interest of the Unit Holders for it to continue. PAXJI PAXJI was launched on 1 November 2006 and its offer period ended on 21 November 2006. It shall exist for as long as it appears to the Manager and the Trustee that it is in the interest of the Unit Holders for it to continue. 1.4 Funds Performance Benchmark The performance benchmarks deemed relevant to access the performance of the respective Funds are shown in the following table: Fund Performance Benchmark Source PECBF Weighted average of: 1. 60% of FTSE Bursa Malaysia EMAS Index return, and 2. 40% of Maybank 1-year fixed deposit rate at the beginning of the financial year. Bursa Malaysia & Maybank DMP PIF Weighted average of: 1. 60% of FTSE Bursa Malaysia EMAS Shariah Index*, and 2. 40% of Maybank 1-year General Investment Account (GIA) rate obtained at the beginning of the financial year. Maybank 1-year fixed deposit rate at the beginning of the financial year. Bursa Malaysia & Maybank Maybank The performance benchmark of the PAXJ and PAXJI is 7% growth in NAV per annum over the long term. This is not a guaranteed return and is only a measurement of fund performance. The PAXJ and PAXJI may or may not achieve the 7% per annum growth rate in any particular financial year but targets to achieve this growth over the long term. * KL Syariah Index was discontinued from 1 November 2007 by Bursa Malaysia. The new index that is substituting KL Syariah Index is FTSE Bursa Malaysia EMAS Shariah Index (FBMS). 1.5 Funds Distribution Policy Fund PECBF, DMP& PIF Distribution Policy The Funds intend to distribute income, if any, on an annual basis. The income distribution may be declared at the end of each financial year or any specified period as maybe approved by the Trustee. PAXJ & PAXJI Distribution by the Funds is incidental. www.pheimunittrusts.com support@pheimunittrusts.com 3 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Information 1.6 Breakdown Of Unit Holdings By Size As At 31.12.2017 1.6.1 PECBF No. of units held Unitholders Size of holding ( 000) % 5,000 and below No. of Accounts % No. of Unitholders % 118 0.45 44 24.72 37 22.84 5,001 10,000 280 1.06 37 20.79 30 18.52 10,001-50,000 50,001-500,000 500,001 and above 1,287 4.88 57 32.02 54 33.33 4.635 17.59 31 17.41 32 19.75 20,033 76.02 9 5.06 9 5.56 Total 26,353 100.00 178 100.00 162 100.00 1.6.2 DMP No. of units held Unitholders Size of holding ( 000) % 5,000 and below 5,001 10,000 10,001-50,000 50,001-500,000 500,001 and above No. of Accounts % No. of Unitholders % 495 1.66 162 29.45 158 29.31 836 2.82 114 20.73 112 20.78 4,786 16.13 213 38.73 209 38.78 6,415 21.62 52 9.45 51 9.46 17,140 57.77 9 1.64 9 1.67 Total 29,672 100.00 550 100.00 539 100.00 www.pheimunittrusts.com support@pheimunittrusts.com 4 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Information 1.6.3 PIF No. of units held Size of holding ( 000) % 5,000 and below 5,001 10,000 10,001-50,000 50,001-500,000 500,001 and above No. of Accounts % Unitholders No. of Unitholders % 65 0.73 22 23.16 21 24.42 98 1.10 14 14.74 7 8.14 671 7.50 32 33.68 31 36.05 4,525 50.56 24 25.26 23 26.74 3,590 40.11 3 3.16 4 4.65 Total 8,949 100.00 95 100.00 86 100.00 1.6.4 PAXJ No. of units held Unitholders Size of holding ( 000) % 5,000 and below 5,001-10,000 10,001-50,000 50,001-500,000 500,001 and above No. of Accounts % No. of Unitholders % 95 0.82 31 22.79 30 22.56 211 1.82 30 22.06 29 21.80 916 7.91 47 34.56 45 33.83 3,730 32.19 23 16.91 24 18.05 6,633 57.26 5 3.68 5 3.76 Total 11,585 100.00 136 100.00 133 100.00 www.pheimunittrusts.com support@pheimunittrusts.com 5 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Information 1.6.5 PAXJI No. of units held Unitholders Size of holding ( 000) % 5,000 and below 5,001-10,000 10,001-50,000 50,001-500,000 500,001 and above No. of Accounts % No. of Unitholders % 146 0.94 49 16.78 46 15.86 468 3.03 62 21.23 63 21.72 3,176 20.55 143 48.97 143 49.31 3,985 25.79 32 10.96 32 11.03 7,677 49.69 6 2.06 6 2.08 Total 15,452 100.00 292 100.00 290 100.00 www.pheimunittrusts.com support@pheimunittrusts.com 6 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance 2 FUND PERFOANCE 2.1 Pheim Emerging Companies Balanced Fund 2.1.1 Portfolio composition FYE 31.12.2017 (%) FYE 31.12.2016 (%) (Percentage of Net Asset Value) FYE 31.12.2015 (%) Construction 1.07 1.17 2.00 Consumer Products 3.59 2.37 10.51 Energy & Water Supply 0.70 0.64 - Finance 1.19 6.30 4.68 Furniture 0.67 - - Healthcare 0.64 - - Infrastructure 1.17-2.12 Industrial Products 13.64 7.81 9.78 Manufacturing 2.10-0.68 Material 1.28 - - Plantations 3.13 7.13 2.09 Pharmacy & Cosmetic 1.54 3.73 4.07 Properties 8.59 10.76 10.23 Technology 10.03 4.00 2.52 Telecommunications - 0.77 0.59 Trading / Services 5.99 6.33 6.16 Transportation 0.40 - - Unquoted/Quoted Corporate Bonds 9.52 14.45 14.62 Cash and cash equivalents 34.76 34.54 29.95 Total 100.00 100.00 100.00 www.pheimunittrusts.com support@pheimunittrusts.com 7 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance PECBF 2.1.2 Other financial and performance data FYE 31.12.2017 FYE 31.12.2016 FYE 31.12.2015 Net asset value ( 000) 31,541.89 27,643.64 27,346.04 Units in circulation ( 000) 26,353.35 24,271.28 22,883.12 Net asset value per unit () 1.1969 1.1389 1.1950 NAV/ unit () ex-distribution NAV/ unit 1.1969 1.1389 1.1950 Highest NAV/ unit for the period NAV/ unit 1.2238 1.2153 1.2367 Lowest NAV/ unit for the period NAV/ unit 1.1404 1.0747 1.1075 Total returns for the period ( 000) Capital growth 976.51 (900.42) (685.07) Income distribution 2,004.17 1,219.98 1,099.77 Income Distribution (Final) On 20.04.2017 On 28.04.2016 On 27.03.2015 Gross distribution per unit (sen) 6.00 6.75 6.75 Net distribution per unit (sen) 6.00 6.75 6.75 Management expense ratio (MER) (%) Portfolio turnover ratio (PTR) (time) 1.83 1.84 1.83 0.33 0.25 0.60 Note: i) MER is calculated based on total fees and expenses incurred by the fund divided by average value of the fund calculated on a daily basis. The MER for the year reduced mainly due to higher average NAV during the year. ii) PTR is calculated based on the average of the acquisitions and disposals of investments of the Fund to the average value of the Fund calculated on a daily basis. The increase in PTR for the year was mainly due to the higher investment trading for the year. www.pheimunittrusts.com support@pheimunittrusts.com 8 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance PECBF 2.1.3 Average total return ended 31 December 2017 (%) One Year +10.53 Three Years +5.47 Five Years +6.35 2.1.4 Annual total return for each of the last five financial years Financial year ended 31 December : (%) 2017 +10.53 2016 +0.46 2015 +6.95 2014 +5.01 2013 +10.44 Note : All returns above are calculated based on NAV per unit adjusted for income distribution. Data source : Bloomberg Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. www.pheimunittrusts.com support@pheimunittrusts.com 9 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance 2.2 Dana Makmur Pheim 2.2.1 Portfolio composition FYE 31.12.2017 (%) FYE 31.12.2016 (%) (Percentage of Net Asset Value) FYE 31.12.2015 (%) Construction 1.57 4.52 3.83 Consumer Products 5.15 5.92 4.06 Industrial Products 24.20 9.07 14.05 Manufacturing 1.11 - - Plantations 2.09 6.31 4.63 Properties 7.28 11.72 13.91 Technology 5.98 7.02 4.06 Trading / Services 4.53 3.49 4.15 Sukuk - 15.73 18.22 Cash and Other Assets 48.09 36.22 33.09 Total 100.00 100.00 100.00 2.2.2 Other financial and performance data FYE 31.12.2017 FYE 31.12.2016 FYE 31.12.2015 Net asset value ( 000) 35,518.82 16,508.61 14,236.82 Units in circulation ( 000) 29,671.60 8,100.30 6,774.75 Net asset value per unit () 1.1971 2.0380 2.1015 www.pheimunittrusts.com support@pheimunittrusts.com 10 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance DMP 2.2.2 Other financial and performance data (continued) FYE 31.12.2017 FYE 31.12.2016 FYE 31.12.2015 NAV/ unit () ex-distribution NAV/ unit 1.1971 2.0380 2.1015 Highest NAV/ unit for the period NAV/ unit 2.2465 2.1380 2.1099 Lowest NAV/ unit for the period NAV/ unit 1.1127 1.9661 1.8653 Total returns for the period ( 000) Capital growth 1,553.00 (475.09) 356.85 Income distribution 2,528.43 485.29 1,370.40 Income Distribution (Final) On 20.04.2017 On 28.04.2016 On 27.03.2015 Gross distribution per unit (sen) 6.00 6.75 6.75 Net distribution per unit (sen) 6.00 6.75 6.75 Management expense ratio (MER) (%) Portfolio turnover ratio (PTR) time) 1.82 1.95 1.94 0.42 0.19 0.39 Note: i) MER is calculated based on total fees and expenses incurred by the fund divided by average value of the fund calculated on a daily basis. The MER for the year reduced mainly due to the higher average NAV during the year. ii) PTR is calculated based on the average of the acquisitions and disposals of Shariahcompliant investments of the fund to the average value of the fund calculated on a daily basis. The increase in PTR for the year was mainly due to the higher investment trading for the year. www.pheimunittrusts.com support@pheimunittrusts.com 11 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance DMP 2.2.3 Average total return ended 31 December 2017 (%) One Year +20.70 Three Years +10.55 Five Years +12.47 2.2.4 Annual total return for each of the last five financial years Financial year ended 31 December : (%) 2017 +20.70 2016-0.13 2015 +10.04 2014 +5.28 2013 +26.49 Note : All returns above are calculated based on NAV per unit adjusted for income distribution and unit split. Data source : Bloomberg Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. www.pheimunittrusts.com support@pheimunittrusts.com 12 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance 2.3 Pheim Income Fund 2.3.1 Portfolio composition FYE 31.12.2017 (%) FYE 31.12.2016 (%) FYE 31.12.2015 (%) (Percentage of Net Asset Value) Construction - - 0.63 Consumer Products 1.59 2.07 2.71 Finance - 0.90 0.81 Furniture 0.35 - - Industrial Products 5.86 6.69 5.69 Pharmacy and Cosmetic 0.67 1.80 1.13 Plantation 1.21 1.07 - Properties 4.83 3.71 5.32 Trading/ Services 1.31 0.53 0.59 Technology 4.69 2.94 1.70 Unquoted Corporate Bonds 20.15 50.84 32.19 Cash and Other Assets 59.34 29.45 49.23 Total 100.00 100.00 100.00 2.3.2 Other financial and performance data FYE 31.12.2017 FYE 31.12.2016 FYE 31.12.2015 Net asset value ( 000) 9,936.62 10,606.60 11,204.42 Units in circulation ( 000) 8,949.34 9,706.77 9,897.33 Net asset value per unit () 1.1103 1.0927 1.1321 NAV/ unit () ex-distribution NAV/ unit 1.1103 1.0927 1.1321 Highest NAV/ unit for the period NAV/ unit 1.1249 1.1397 1.1339 Lowest NAV/ unit for the period NAV/ unit 1.0685 1.0515 1.0708 Total returns for the period ( 000) Capital growth (103.54) (159.68) 444.22 Income distribution 619.33 438.09 425.57 www.pheimunittrusts.com support@pheimunittrusts.com 13 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance PIF 2.3.2 Other financial and performance data (continued) Income Distribution (Final) FYE 31.12.2017 On 20.04.2017 FYE 31.12.2016 On 28.04.2016 FYE 31.12.2015 On 27.03.2015 Gross distribution per unit (sen) 4.00 6.75 2.00 Net distribution per unit (sen) 4.00 6.75 2.00 Management expense ratio (MER) (%) Portfolio turnover ratio (PTR) (time) 1.61 1.55 1.44 0.09 0.17 0.28 Note: i) MER is calculated based on total fees and expenses incurred by the fund divided by average value of the fund calculated on a daily basis. The MER for the year increased mainly due to lower average NAV during the period. ii) PTR is calculated based on the average of the acquisitions and disposals of investments of the fund to the average value of the fund calculated on a daily basis. The PTR for the year was lower than previous year as investments were sold to raise money to meet redemption payment in previous year. 2.3.3 Average total return ended 31 December 2017 (%) One Year +5.36 Three Years +5.17 Five Years +4.21 www.pheimunittrusts.com support@pheimunittrusts.com 14 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance 2.3.4 Annual total return for each of the last five financial years Financial year ended 31 December : (%) 2017 +5.36 2016 +2.51 2015 +5.91 2014 +2.29 2013 +3.29 Note : All returns above are calculated based on NAV per unit adjusted for income distribution. Data source : Bloomberg PIF Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. www.pheimunittrusts.com support@pheimunittrusts.com 15 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance 2.4 Pheim Asia Ex-Japan Fund 2.4.1 Portfolio composition Industry Sector FYE 31.12.2017 (%) (Percentage of NAV) FYE 31.12.2016 (%) (Percentage of NAV) FYE 31.12.2015 (%) (Percentage of NAV) Computer 9.84 1.10 1.16 Construction 13.09 2.12 3.58 Consumer Products 9.82 8.33 11.90 Electronic 1.48 - - Energy and Water Supply 1.46 1.24 - Finance 7.77 9.15 14.34 Furniture 1.24 - - Healthcare 2.43 - - Industrial Products 13.22 18.06 21.69 Infrastructure 0.98 0.64 0.62 Manufacturing 2.67-3.24 Material 0.86 - - Mining 0.85 0.98 0.86 Oil & Gas related - - 2.41 Pharmaceutical and Cosmetic 1.56 6.26 9.44 Plantations 2.07 8.56 3.38 Properties 2.49 14.73 8.87 Technology 5.45 9.86 5.97 Telecommunications 0.40 2.39 2.35 Trading / Services 2.16 5.06 0.95 Transportation 0.11 - - Cash and cash equivalents 20.04 11.52 9.24 Total 100.00 100.00 100.00 www.pheimunittrusts.com support@pheimunittrusts.com 16 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance PAXJ 2.4.2 Other financial and performance data FYE 31.12.2017 FYE 31.12.2016 FYE 31.12.2015 Net asset value ( 000) 12,860.95 17,014.85 18,596.32 Units in circulation ( 000) 11,585.40 18,122.60 19,859.32 Net asset value per unit () 1.1102 0.9389 0.9364 NAV/ unit () ex-distribution NAV/ unit 1.1102 0.9389 0.9364 Highest NAV/ unit for the period NAV/ unit 1.1430 0.9446 0.9857 Lowest NAV/ unit for the period NAV/ unit 0.9429 0.8398 0.8403 Total returns for the period ( 000) Capital growth 1,941.65 (653.04) 1,625.60 Income distribution 744.05 673.12 (906.05) Income Distribution (Final) n.a. n.a. n.a. Gross distribution per unit (sen) - - - Net distribution per unit (sen) - - - Management expense ratio (MER) (%) 2.14 2.14 2.11 Portfolio turnover ratio (PTR) (time) 0.93 0.45 1.10 Note: i) MER is calculated based on total fees and expenses incurred by the fund divided by average value of the fund calculated on a daily basis. The MER for the year was the same with that of previous year. ii) PTR is calculated based on the average of the acquisitions and disposals of investments of the fund to the average value of the fund calculated on a daily basis. The increase in PTR for the year was mainly due to the higher investment trading for the year. www.pheimunittrusts.com support@pheimunittrusts.com 17 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance PAXJ 2.4.3 Average total return ended 31 December 2017 (%) One Year +18.24 Three Years +8.66 Five Years +6.47 2.4.4 Annual total return for each of the last five financial years Financial year ended 31 December : (%) 2017 +18.24 2016-0.56 2015 +2.80 2014 +1.80 2013 +4.78 Note : All returns above are calculated based on NAV per unit adjusted for income distribution Data source : Bloomberg Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. www.pheimunittrusts.com support@pheimunittrusts.com 18 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance 2.5 Pheim Asia Ex-Japan Islamic Fund 2.5.1 Portfolio composition Industry Sector FYE 31.12.2017 (%) (Percentage of NAV) FYE 31.12.2016 (%) (Percentage of NAV) FYE 31.12.2015 (%) (Percentage of NAV) Computer 0.45 2.25 1.89 Construction 2.97 5.28 5.51 Consumer Products 4.31 11.80 14.40 Electronic 1.69 - - Energy and Water Supply - 2.44 1.76 Healthcare 2.88 - - Industrial Products 19.88 13.12 17.12 Manufacturing 6.47 - - Material 1.85 - - Mining 0.48 6.54 4.53 Pharmacy and Cosmetics 1.57 7.26 5.55 Plantations 4.28 8.24 9.55 Properties 7.77 12.56 13.10 Technology 11.69 7.99 12.91 Telecommunications 0.91 2.50 3.75 Trading / Services 4.79 4.22 2.90 Cash and cash equivalents 28.01 15.80 7.03 Total 100.00 100.00 100.00 www.pheimunittrusts.com support@pheimunittrusts.com 19 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance PAXJI 2.5.2 Other financial and performance data FYE 31.12.2017 FYE 31.12.2016 FYE 31.12.2015 Net asset value ( 000) 9,881.97 6,889.89 7,620.92 Units in circulation ( 000) 15,452.05 6,516.44 7,248.67 Net asset value per unit () 0.6395 1.0573 1.0514 NAV/ unit () ex-distribution NAV/ unit 0.6395 1.0573 1.0514 Highest NAV/ unit for the period NAV/ unit 1.3350 1.0904 1.1069 Lowest NAV/ unit for the period NAV/ unit 0.6136 0.9832 0.9187 Total returns for the period ( 000) Capital growth 743.98 (226.53) 244.84 Income distribution 760.50 265.96 (227.270) Income Distribution (Final) n.a. n.a. n.a. Gross distribution per unit (sen) - - - Net distribution per unit (sen) - - - Management expense ratio (MER) (%) 2.76 3.21 2.51 Portfolio turnover ratio (PTR) (time) 0.64 0.38 0.64 Note: i) MER is calculated based on total fees and expenses incurred by the fund divided by average value of the fund calculated on a daily basis. The MER for the year was lower due to higher average NAV during the year. ii) PTR is calculated based on the average of the acquisitions and disposals of investments of the fund to the average value of the fund calculated on a daily basis. The increase in PTR for the year was mainly due to the higher investment trading for the year. www.pheimunittrusts.com support@pheimunittrusts.com 20 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Fund Performance PAXJI 2.5.3 Average total return ended 31 December 2017 (%) One Year +21.39 Three Years +9.01 Five Years +9.19 2.5.4 Annual total return for each of the last five financial years Financial year ended 31 December : (%) 2017 +21.39 2016-0.07 2015 +4.07 2014 +3.80 2013 +15.42 Note : All returns above are calculated based on NAV per unit adjusted for income distribution and unit split. Data source : Bloomberg Past performance is not necessarily indicative of future performance and unit prices and investment returns may go down, as well as up. www.pheimunittrusts.com support@pheimunittrusts.com 21 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3 MANAGER S REPORT 3.1 Performance Review 3.1.1 PECBF The Fund has successfully met its investment objective of providing investors with capital appreciation in longer term by investing in a balanced portfolio of equities and fixed income instruments. The net asset value (NAV) per unit of the Fund stood at 1.1969 as at 31 December 2017. Taking into consideration the effects of income distribution for the year under review, the NAV per unit would have increased by 10.53%, underperforming the benchmark by 7.86%. In the second half of 2017, the Fund underperformed the benchmark by 0.99%. The total NAV increased to approximately 31.54 million from 27.64 million. The Fund has made an income distribution of 6.00 sen per unit (net of tax) on 20 April 2017 for the year ended 31 December 2016. After the income distribution, the NAV per unit adjusted to 1.1598 from 1.2198. Performance table since the last review period (6 months): As at Benchmark/ Fund 31.12.2017 As at 30.06.2017 Change % Benchmark of PECBF 124.63% 119.63% +5.00 PECBF NAV per unit () 1.1969^ 1.1507^ +4.01 Performance table for financial year 2017 (1 year): As at Benchmark/ Fund 31.12.2017 As at 31.12.2016 Change % Benchmark of PECBF 124.63% 106.24% +18.39 PECBF NAV per unit () 1.1969^ 1.1389 +10.53 a ^ adjusted for income distribution on 20.04.2017 a % of change is computed on a like-for-like basis after adjustments to neutralise the effects of the income distribution during the year www.pheimunittrusts.com support@pheimunittrusts.com 22 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.1.2 DMP The Fund has successfully met its investment objective of providing investors with capital appreciation in longer term by investing in a balanced portfolio of equities and fixed income instruments which strictly comply with the principles of the Shariah. The net asset value (NAV) per unit of the Fund stood at 1.1971 as at 31 December 2017. Taking into consideration the effects of income distribution and unit split for the year under review, the NAV per unit would have increased by 20.70%, outperforming the benchmark by 4.5%. In the second half of 2017, the Fund outperformed the benchmark by 1.43%. The total NAV increased to approximately 35.52 million from 16.51 million. The Fund has made an income distribution of 6.00 sen per unit (net of tax) on 20 April 2017 for the year ended 31 December 2016. After the income distribution, the NAV per unit adjusted to 2.1524 from 2.2124. On 25 August 2017, the Fund has declared a 1:1 unit split exercise for the existing unit holders, who received one new unit for every one unit held, while maintaining the value of total holdings. After the unit split, the NAV per unit adjusted to 1.1184 from 2.2369. Performance table since the last review period (6 months): As at Benchmark/ Fund 31.12.2017 As at 30.06.2017 Change % Benchmark of DMP 123.46% 117.03% +6.43 DMP NAV per unit () 1.1971^^ 2.2197^ +7.86 a Performance table for financial year 2017 (1 year): As at Benchmark/ Fund 31.12.2017 As at 31.12.2016 Change % Benchmark of DMP 123.46% 107.26% +16.2 DMP NAV per unit () 1.1971^^ 2.0380 +20.70 a ^ adjusted for income distribution on 20.04.2017 ^^ adjusted for income distribution on 20.04.2017 & unit spilt on 25.08.2017 a % of change is computed on a like-for-like basis after adjustments to neutralise the effects of the income distribution and unit split during the year 3.1.3 PIF The Fund has successfully met its investment objective of providing investors with consistent income returns in the medium to longer term by investing primarily in medium to long term fixed income instruments and also equities and other high yielding instruments. The net asset value (NAV) per unit of the Fund stood at 1.1103 as at 31 December 2017. Taking into consideration the effects of income distribution for the year under review, the NAV per unit would have increased by 5.36%, outperforming the benchmark by 2.27%. In the second half of 2017, the Fund outperformed the benchmark by 1.26%. The total NAV declined to approximately 9.94 million from 10.61 million. www.pheimunittrusts.com support@pheimunittrusts.com 23 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.1.3 PIF (contd.) The Fund has made an income distribution of 4.00 sen per unit (net of tax) on 20 April 2017 for the year ended 31 December 2016. After the income distribution, the NAV per unit adjusted to 1.0850 from 1.1250. Performance table since the last review period (6 months): As at Benchmark/ Fund 31.12.2017 As at 30.06.2017 Change % 1-year fixed deposit rate (pro-rated) 54.28% 52.72% +1.56 PIF NAV per unit () 1.1103^ 1.0798^ +2.82 Performance table for financial year 2016 (1 year): As at Benchmark/ Fund 31.12.2017 As at 31.12.2016 Change % 1-year fixed deposit rate (pro-rated) 54.28% 51.19% +3.09 PIF NAV per unit () 1.1103^ 1.0927 +5.36 a ^adjusted for income distribution on 20.04.2017 a % of change is computed on a like-for-like basis after adjustments to neutralise the effects of the income distribution during the year 3.1.4 PAXJ The Fund has successfully met its investment objective of providing investors with capital appreciation in long term by investing primarily in Asian markets excluding Japan. The net asset value (NAV) per unit of the Fund stood at 1.1102 as at 31 December 2017. outperforming the benchmark by 11.24%. In the second half of 2017, the Fund has outperformed the benchmark by 3.47%. The total NAV declined to approximately 12.86 million from 17.01 million. There is no income distribution for year 2017. Performance table since the last review period (6 months): As at Benchmark/ Fund 31.12.2017 As at 30.06.2017 Change % 7% per annum (pro-rated) 80.22% 76.69% +3.53 NAV per unit () 1.1102 1.0376 +7.00 Performance table for financial year 2017 (1 year): As at Benchmark/ Fund 31.12.2017 As at 31.12.2016 Change % 7% per annum (pro-rated) 80.22% 73.22% +7.00 NAV per unit () 1.1102 0.9389 +18.24 www.pheimunittrusts.com support@pheimunittrusts.com 24 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.1.5 PAXJI The Fund has successfully met its investment objective of providing investors with capital appreciation in long term by investing primarily in Asian markets excluding Japan through investments that comply with Shariah requirements. The net asset value (NAV) per unit of the Fund stood at 0.6395 as at 31 December 2017. Taking into consideration the effects of unit split for the year under review, the NAV per unit would have increased by 21.39%, outperforming the benchmark by 14.39%. In the second half of 2017, the Fund outperformed the benchmark by 1.97%. The total NAV increased to approximately 9.88 million from 6.89 million. On 30 November 2017, the Fund has declared a 1:1 unit split exercise for the existing unit holders, who received one new unit for every one unit held, while maintaining the value of total holdings. After the unit split, the NAV per unit adjusted to 0.6357 from 1.2714. There is no income distribution for year 2017. Performance table since the last review period (6 months): As at Benchmark/ Fund 31.12.2017 As at 30.06.2017 Change % 7% per annum (pro-rated) 77.84% 74.31% +3.53 NAV per unit () 0.6395^ 1.2207 +5.50 a Performance table for financial year 2016 (1 year): As at Benchmark/ Fund 31.12.2017 As at 31.12.2016 Change % 7% per annum (pro-rated) 77.84% 70.84% +7.00 NAV per unit () 0.6395^ 1.0573 +21.39 a ^adjusted for unit split on 30.11.2017 a % of change is computed on a like-for-like basis after adjustments to neutralise the effects of the unit split during the year www.pheimunittrusts.com support@pheimunittrusts.com 25 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.2 Performance Chart Since Inception 3.2.1 PECBF 3.2.2 DMP www.pheimunittrusts.com support@pheimunittrusts.com 26 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.2.3 PIF 3.2.4 PAXJ www.pheimunittrusts.com support@pheimunittrusts.com 27 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.2.5 PAXJI Note: The data source for all the above performance returns is Bloomberg. www.pheimunittrusts.com support@pheimunittrusts.com 28 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.3 Changes in Asset Allocation since the last review (in percentage) 3.3.1 PECBF Asset Class As at 31.12.2017 As at 31.12.2016 Change Equity Securities in Malaysia 33.62 26.12 +7.50 Equity Securities outside Malaysia 22.10 24.89-2.79 Corporate Bonds 9.52 14.45-4.93 Cash and cash equivalent 34.76 34.54 +0.22 Total 100.00 100.00-3.3.2 DMP Asset Class Shariah-compliant equity securities in Malaysia As at 31.12.2017 As at 31.12.2016 Change 51.91 48.05 +3.86 Sukuk - 15.73-15.73 Cash and cash equivalent 48.09 36.22 +11.87 Total 100.00 100.00-3.3.3 PIF Asset Class As at 31.12.2017 As at 31.12.2016 Change Corporate Bonds in Malaysia 20.15 50.84-30.69 Money market & cash 59.33 29.45 +29.88 Equity Securities in Malaysia 16.97 14.65 +2.32 Equity Securities outside Malaysia 3.55 5.06-1.51 Total 100.00 100.00 - www.pheimunittrusts.com support@pheimunittrusts.com 29 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.3.4 PAXJ Asset Class As at 31.12.2017 As at 31.12.2016 Change Equity Securities outside Malaysia 50.89 53.09-2.2 Equity Securities in Malaysia 29.07 35.39-6.32 Cash and cash equivalent 20.04 11.52 +8.52 Total 100.00 100.00-3.3.5 PAXJI Asset Class Shariah-compliant equity securities outside Malaysia Shariah-compliant equity securities in Malaysia As at 31.12.2017 As at 31.12.2016 Change 28.85 40.74-11.89 43.02 43.46-0.44 Cash and cash equivalent 28.13 15.80 +12.33 Total 100.00 100.00-3.4 Funds Strategies and Policies Employed 3.4.1 PECBF As at end-december 2017, Pheim Emerging Companies Balanced Fund s asset allocation was 55.72% in equities, 9.52% in fixed income securities and 34.76% in cash. The equity exposure has increased by 4.71% as a result of the price appreciation of certain equities held in the portfolio. During the year, the Fund had invested in foreign equities listed in Hong Kong/China, Singapore, Indonesia, Thailand, Philippines and Korea as part of the diversification strategy. The exposure of fixed income securities has reduced by 4.93% in line with negative outlook in the rising interest-rate environment. For the year ended 31 December 2017, PECBF recorded the following gains or losses in the various markets invested. www.pheimunittrusts.com support@pheimunittrusts.com 30 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report Net realised and Market unrealised gain/ (loss) 000 Malaysia 2,673 Indonesia (254) Thailand 146 Philippines 175 Singapore (512) Hong Kong/China 391 Korea 82 3.4.2 DMP As at end-december 2017, Dana Makmur Pheim s asset allocation was 51.91% in Shariah-compliant equities and 48.09% in cash. The Shariah-compliant equity exposure has increased to 51.91% from 48.05% as a result of price appreciation of certain equities held in the portfolio. During the year 2017, the sukuk exposure reduced to Nil from 15.73% in the preceding year after the sukuk reached maturity. The sukuk that matured was not replaced by another sukuk investment given the negative sukuk outlook in the rising interest rate environment. For the year ended 31 December 2017, DMP recorded a net profit of 3,961,809.34 (total of realised and unrealised) due to investments in domestic Shariah-compliant equities. Net realised and Market unrealised gain/ (loss) 000 Malaysia 3,962 3.4.3 PIF As at end-december 2017, Pheim Income Fund s asset allocation was 20.15% in corporate bonds, 59.33% in money market/cash and 20.52% in equities. As part of our diversification strategy, the Fund had invested in foreign equities listed in Hong Kong/China, Singapore, and Indonesia. The exposure of fixed income securities decreased by 30.69% as a result of a sukuk that had reached maturity. The sukuk that matured was not replaced by another sukuk investment given the negative fixed income outlook in the rising interest rate environment. For the year ended 31 December 2017, PIF recorded the following gains or losses in the various markets invested. www.pheimunittrusts.com support@pheimunittrusts.com 31 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report Net realised and Market unrealised gain/ (loss) 000 Malaysia 426 Indonesia (57) Singapore (86) Hong Kong/China 39 3.4.4 PAXJ During the year, the Fund s total equity exposure in foreign and domestic equities increased by 8.52%. As at 31st December 2017, PAXJ s total equity exposure was 79.96% whereby 50.89% was invested in foreign equities and the remaining is in domestic equities. During the year, the PAXJ has invested in foreign equities listed in Hong Kong/China, Singapore, Indonesia, Taiwan, Thailand, Philippines and Korea. For the year ended 31 December 2017, PAXJ recorded the following gains or losses in the various markets invested. Net realised and Market unrealised gain/ (loss) 000 Malaysia 2,445 Indonesia (348) Korea 245 Thailand 130 Singapore (363) Hong Kong/China 270 Philippines 139 Taiwan 173 3.4.5 PAXJI During the year, the Fund s total equity exposure in both foreign and domestic Shariahcompliant equities decreased by 12.33%. As at 31 December 2017, PAXJI s total equity exposure was 71.87% whereby 43.02% was invested in Shariah-compliant foreign equities and the remaining in domestic Shariah-compliant equities. www.pheimunittrusts.com support@pheimunittrusts.com 32 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report During the year, the PAXJI has invested in Shariah-compliant foreign equities listed in Hong Kong/China, Singapore, Indonesia, Taiwan, Thailand, Philippines and Korea. For the year ended 31 December 2017, PAXJI recorded the following gains or losses in the various markets invested. Net realised and Market unrealised gain/ (loss) 000 Malaysia 1,191 Indonesia (104) Korea 80 Thailand 115 Singapore (47) Philippines 72 Hong Kong/China 213 Taiwan 40 www.pheimunittrusts.com support@pheimunittrusts.com 33 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.5 Market Review, Outlook and Strategy 3.5.1 Malaysian Bond/Sukuk Market 3.5.1.1 Bond Market Review Bank Negara Malaysia (BNM) decided to maintain its Overnight Policy Rate (OPR) at 3% at its latest Monetary Policy Committee Meeting (MPC) on 9 November 2017, following sudden 25bps cut mid-2016. Policymakers pointed that it may consider reviewing the current degree of monetary accommodation in the future given the strength of the global and domestic macroeconomic conditions. BNM opined that at current level, the stance of monetary policy remains accommodative, although the central bank agree that the Malaysian economy has become more entrenched, with both domestic and external sectors registering strong performances. The country s Gross Domestic Product (GDP) growth is estimated at 5.2% to 5.7% in 2017 and 5% to 5.5% in 2018. The central bank expects domestic demand to remain the key source of growth for 2018 as private consumption, supported by continued improvements in income and overall labor market condition, will be boosted. It also noted that investment will be sustained by infrastructure projects and higher capital investment in the manufacturing and services sector; whilst external sector will provide additional impetus to the economy. In another statement, BNM emphasized that the ringgit has strengthened to better reflect the economic fundamentals. Banking system liquidity remains sufficient with financial institutions continuing to operate with strong capital and liquidity buffers, with encouraging growth of financing to the private sector, which has been sustained and is supportive of economic activity. On the external front, BNM said the global economy continues to strengthen and global trade has picked up significantly, despite risks arising from geopolitical and policy developments in major economies. During the year of 2017, all three major credit rating agencies, i.e. Standard & Poor s (S&P), Moody s and Fitch, have affirmed Malaysia s sovereign ratings at A-, A3 and A- respectively, all with stable outlook. However, S&P and Fitch opined that, ongoing political challenges combined with approaching elections will pose as a threat to the sovereign rating over the near-to-medium term. These challenges, they further stressed, could manifest themselves via a rise in the cost of refinancing Malaysia s sizeable gross external financing needs, or via foreign outflows from Malaysia s deep local currency government bond market. Nonetheless, they affirmed that the credit rating reflects Malaysia s strong external position and monetary policy flexibility, as well as sound growth prospects. The total outstanding bond (including Sukuk) was 1.282 bil as at end Nov17. The government 10-year bond yield dropped to 3.931% as at end of 2017 from 4.217% as at end of 2016. The bond yield swung between 4.263% (January) and 3.841% (September) during the year 2017. www.pheimunittrusts.com support@pheimunittrusts.com 34 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.5.1.2 Bond Market Outlook and Strategy 2018 sees challenges arising for Malaysia s debt market in the form of rising yields risk and potential outflows from further upside to the equities market and political tensions. On the external front, Trump s administration and implementation of his policies will continue to be the key theme to watch out for; whilst tensions amidst military powerhouses China, South Korea and US may threaten to undermine market s buoyancy. On the monetary policy front, with US Fed aggressively raising rates throughout 2017, market is expecting further rate hikes into 2018 with Jerome Powell, who is not unlike his predecessor in terms of policy preferences, replacing Janet Yellen as the new Fed chair. With higher inflationary pressure expected in the year 2018 on the back of rising oil price and improving wage growth, as well as the rising interest rates in the US, we opine that BNM may raise the OPR in 2018, which may further provide a boost to the strengthening Malaysian Ringgit. Given the challenging economic outlook, we would continue to adopt a tight credit assessment policy. Among the fundamental assessment on the bonds include the issuers credit profile, management, financial performance and industry outlook. In order to mitigate the interest rate risks, we would prefer to invest in fixed income securities/sukuk which offer shorter-dated maturities. Apart from investing in high quality bonds/sukuk that meet our investment criteria, we would ensure that the bonds/sukuk invested would be able to give investors a decent yield for the risks undertaken. www.pheimunittrusts.com support@pheimunittrusts.com 35 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.5.2 Stock Markets Review 3.5.2.1 Malaysian Stock Market (Bursa Malaysia) The FBM KLCI closed the year 2017 in the positive territory, supported by stronger than expected domestic economic growth, after recording three consecutive annual declines in 2014, 2015 and 2016. The main Index closed at 1,796.81 points, up 9.5% y.o.y. The stronger than expected GDP growth in 2017 supported the market but it continued to underperform its ASEAN peers. The Ringgit appreciated by 10.5% y.o.y against the US Dollar, closing the year at 4.0465/USD. Bank Negara Malaysia has been maintaining its overnight policy rate (OPR) at 3.0% throughout the year after a 25bps cut in July 2016. The Central Bank stated that the rate remains accommodative and supportive of economic activity and it also indicated in early November that the OPR may be raised, given the strength of the global and domestic macroeconomics. Headline inflation was recorded at 3.4% y.o.y in November, slowing from the 3.7% y.o.y rise in October. It was the lowest inflation rate since July. The easing inflation rate was mainly attributable to a slowdown in cost of food & non-alcoholic beverages, transport and housing & utilities. The Central Bank projected the headline inflation rate to be at the upper range of the forecast range of 3-4% for 2017 and will then moderate in 2018 on expectations of smaller effects from global cost factors. However, it will continue to be dependent on the global oil prices. The Malaysian economy expanded by 6.2% y.o.y in 3Q16, stronger than the 5.8% growth recorded in 2Q16. The strong growth was driven by domestic demand particularly private sector spending. The World Bank projects Malaysia's economy to continue at a strong pace of 5.2% y.o.y in 2018, though slightly slower compared with the expected 5.8% growth in 2017. The World Bank's Malaysia Economic Monitor report issued in December said the 5.8% y.o.y growth would be the country s highest annual growth rate since 2014. The U.S. fiscal and trade policies, the pace of Fed s rate hike and geopolitical tension in various regions of the world will remain as the ongoing uncertainties. On the domestic front, the 14th General Election is expected to be held in the first half of the year in which investors may stay on the sideline nearing the election date. The economy is expected to continue to grow at a strong pace in 2018 although a bit slower than the stronger than expected pace which had supported the market in 2017. We shall continue to be selective in seeking investment opportunities, favouring stocks with quality management, low valuation and not excessively geared while trimming those we deem have ran beyond fundamentals. www.pheimunittrusts.com support@pheimunittrusts.com 36 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.5.3 Foreign Securities Investment - Market Review 3.5.3.1 Singapore Market FSSTI Index ended the year on a high note, gaining 18.13% in 2017 to close the index at 3,402.92 points. The Index experienced sharp correction mid-december following strong rally throughout October and November, before again surging to new high end December. The SGD appreciated 7.66% in 2017 against the USD and closed at SGD1.336/USD at the end of December. The stronger SGD can be attributed to improving market sentiments amidst higher than expected GDP growth and expectations of tightening monetary policy in 2018. Singapore s economy expanded 3.5% this year, more than double the government s initial forecast as the country benefitted from the global economic upswing. Singapore s 2017 growth comes at the top end of the most recent trade ministry prediction of 3-3.5% and compares with the median 3.3% forecast in a Bloomberg survey, though the manufacturing-led growth spurt lost some steam in the final three months of the year. 4Q17 GDP came in at 3.1%. Economists maintains that while 2018 s economy looks to be stable, it may not be as strong as 2017, coming from a high base. Manufacturing growth saw signs of tapering off with the gap being picked up by services sector, which showed encouraging growth throughout the year. Potential headwinds like the slowdown in China s investments and rising government s expenditure as highlighted by PM Lee Hsien Loong, may hamper growth prospects for the country. Already in talks is the implementation of higher GST rate from the current 7% to 8%-10% according to consensus, as a move to cushion rapidly increasing government financing needs. Monetary Authority of Singapore (MAS) has maintained the rate of appreciation of Singapore Dollar s nominal effective exchange rate policy band at zero percent previously, given the benign inflation level and soft labour market. However, with growth fundamentals improving (holding everything at status quo), rising inflation risk should not be ignored. Economists generally view that this is an appropriate timing for MAS to return to an exchange rate appreciation stance, in line with global monetary policies. Singapore home prices rose by 1% in 2017, signalling a turnaround after three straight years of declines as the government tweaked seller s stamp duty (SSD) in March17. A jump in home sales and developers aggressive bids for land are stoking optimism that the property market is indeed, making a comeback despite cooling measures still in place. Singapore s economy may not experience smooth sailing in 2018, as tapering of manufacturing sector and strong SGD will crimp on exports, on the other hand, impending implementation of GST hike may cause domestic consumption to weaken further. Although property sector and banking sector are slated to push the market to new highs, we remained cautious on the market on the back of rising rates and taxes, besides risk of potential outflows. www.pheimunittrusts.com support@pheimunittrusts.com 37 Your Need is our Focus

PHEIM Annual Report 31.12.2017 Manager s Report 3.5.3.2 Hong Kong/ China Market In 2017, Hang Seng Index increased by 35.99% to 29,919.15 points while Hang Seng China Enterprise Index increased by 24.64% to 11,709.30 points. The strong performance of the indexes was due to recovery of global economy and strong China domestic economy which boosted China companies corporate earnings. China s gross domestic product expanded 6.9% y.o.y in 2017, beating official target of 6.5% and picking up steam for the first time since 2010. The economy expanded 6.8% y.o.y in 4th quarter 2017. The economy maintained stable momentum of growth despite its battles against massive debt and polluting factories. In 2017, central SOEs eliminated steel production capacity by 5.95mil tons and coal capacity by 27.03 mil tons, both beating annual reduction target of 5.95 mil tons of steel and 24.73 mil tons of coal. For 2018, central SOEs plan to shed coal production capacity by over 10 mil tons with coal industry restructuring a priority. Modern technology will be used to upgrade traditional steel industry, and efforts will be strengthened in overcapacity cuts in ship building, nonferrous metals and construction material sector, Shen Ying, the chief accountant of the State-owned Assets Supervision and Administration Commission (SASAC) said. In September 2017, S&P Global Ratings cut China s sovereign credit rating for the first time since 1999, citing the risks from soaring debt, and revised its outlook to stable from negative. The sovereign rating was cut by one step, to A+ from AA-. In May, Moody cut its rating on China to A1 from Aa3 citing similar concerns over economy wide debt. Moody's cited the likelihood of a "material rise" in debt and the burden that will place on the government s finances, while also changing the outlook to stable from negative. Global equity indexes provider MSCI announced that beginning in June 2018, it will include 222 China Large Cap A-shares in the MSCI Emerging Markets (EM) Index and the MSCI ACWI (All Country World Index) Index. It represents on a pro forma basis approximately 0.73% of the weight of the MSCI Emerging Markets Index at a 5-percent partial Inclusion Factor. MSCI will reflect a higher representation of China A shares when further alignment with international market accessibility standards occurs, sustained accessibility is proven within Stock Connect and international institutional investors gain further experience in the market, MSCI Managing Director Remy Briand said. Riding on global economy recovery, China managed to expedite its supply side structural reform and also deleveraging of its economy, without experiencing economic slowdown. The economy rebalancing act will provide a strong foundation for China to achieve long term sustainable growth. We are optimistic of China s long term prospect and will seize the opportunity to accumulate stocks with solid fundamentals. www.pheimunittrusts.com support@pheimunittrusts.com 38 Your Need is our Focus