Annual Review 2015 For the Financial Year Ended 31 December 2015

Transcription

1 Annual Review 2015 For the Financial Year Ended 31 December 2015 MANULIFE investment-linked funds EQUITY FUND Managed Fund Income Fund Dana Ekuiti Dinamik Manulife Flexi Invest Fund Manulife Progress Fund Manulife Emerging Eastern Europe Fund Manulife China Value Fund Manulife Asian Small Cap Growth Fund

2 About Manulife Malaysia Manulife Insurance Berhad, a wholly owned subsidiary of Manulife Holdings Berhad, is a member of Canada-based Manulife Financial Corporation. Manulife Insurance Berhad currently serves the needs of more than 290,000 policyholders. Through its subsidiary companies, the Manulife Group offers an innovative range of financial protection and wealth management products and services to meet different customer needs. Manulife Holdings Berhad has been listed on the Main Board of Bursa Malaysia since As at 31 December 2015, assets under management were over RM7.8 billion.

3 content 1. Market Commentary 2 2. Fund Performance 36 - Comparative Performance Tables 46 - Investment Information Summary of Financial Statement Notes to the Financial Information Statement by Manager Independent Auditors Report 89

4 Market Commentary

5 market commentary EQUITY FUND local funds FUND OBJECTIVE The fund s investment objective is to provide investors with medium to long term capital appreciation by investing entirely in equities from various sectors of the Malaysian economy. Investors in this fund are able to tolerate short-term volatility. INVESTMENT REVIEW We began 2015 amid a collapse in the crude oil market. Global markets were also volatile after the US Federal Reserve ended its Quantitative Easing program in the 4th quarter of Market sentiment recovered in January 2015 on the back of the confirmation that the European Central Bank (ECB) would embark on qualitative easing. Sentiment was lifted further when global oil prices rebounded in February. Locally, corporate earnings released during the month were not as bad as initially feared. While April started off on a strong note for Malaysia as the FBM100 ( Index ) rose to a 5-month high on the back of the stabilising Ringgit Malaysia (MYR) and oil prices, May saw the Index fall on the back of weak corporate results and heightened political concerns. The tabling of the 11th Malaysia Plan (11MP) on May 21 failed to excite the market. In June 2015, the Malaysian market continued to be weighed down by both external and internal risk factors such as; 1) Greece default risk, 2) US rate hike, 3) the impending Fitch decision on Malaysia s sovereign rating, 4) 1MDB s debt woes, and 5) foreign funds outflows. Fitch s eventual decision to revise Malaysia s sovereign rating to stable from negative failed to boost market sentiment. Investors remained cautious, as the market continued to be affected by local headwinds and foreign funds outflows. The situation was further aggravated by the China slowdown. The August reporting month saw the Index falling significantly by 835 points or 7.2% as Malaysian equities suffered from weak 2Q15 corporate earnings, as well as weak currency and capital outflows, which were fuelled by fears of capital controls. MYR weakened 8.6% against the USD in August alone, hitting a new high of on 26 August. But the market rebounded strongly in September on the back of some stability returning to regional markets and Wall Street, and news that the government was allocating RM20bn to ValueCAP to buy up good value stocks. In October, markets were further lifted by the Federal Reserve s dovish tones which implied a possible delay in rate lift off, as well as the European Central Bank s hint that it could extend easing. China s willingness for policy support also encouraged market stability and prompted some fund flows back into the Emerging Markets. This extended to November, where news about the sale of Edra s power assets to the Chinese, as well as China s commitment to buy Malaysian bonds helped support sentiment. December was a volatile month as the Index fell 2.6% before rebounding to add 158 points or 1.4% for the month. Oil prices dipped after the OPEC refrained from setting an official output target. Meanwhile, the much debated US Federal Reserve lift-off finally happened as interest rates were raised by 25 bps. For 2015, the Index shed 2.90%, closing the year at 11,470.6 points. Annual Review 2015 Manulife Investment-Linked Funds 3

6 market commentary EQUITY FUND (continued) local funds OUTLOOK Global equity markets opened 2016 with an unanticipated correction. However, this volatility in our view is a temporary disconnect between equity markets and economic fundamentals. Over in China, the loss of confidence over Renminbi (RMB) devaluation triggered a major market selloff; and not so reflecting the underlying economic growth, especially when Chinese government was taking steps to reform the economy; and services sector continued to grow strongly. Increased in public spending with monetary easing by People s Bank of China (PBoC) are positives for a stable economy. Macro risks of concern including higher US interest rates, a strengthening USD, falling commodity prices and potential high yield credit defaults are bad news already priced in and should weigh less on markets going forward. Global Purchasing Manager s Index for developed economies remains healthy, suggesting decent growth ahead in Though emerging market PMI is weaker, but is more neutral than contractionary. The US, Europe and Japan are all forecast to see improved GDP growth in This will support uneven recovery in emerging markets economies. The US economic headwinds should fade as tailwinds from the housing sector, cheap gasoline and wage growth support consumer spending and continued economic expansion. With this, Fed may not raise interest rate too aggressively. Meanwhile, Europe economic data are improving. The local market, we are seeing decoupling signs of the equity market from Ringgit and crude oil weaknesses. Uncertainties around the policy in Malaysia was reduced with the recalibration of 2016 Budget and rectification of Trans-Pacific Partnership (TPP). That said, transition with sharper spending cuts may pose near term growth risks. STRATEGY In an environment still driven by short-term uncertainties, we remain focus on growth and income strategy, focusing on stocks with strong balance sheets and sustainable cash flows. We remained underweights in Banks in view of moderating loans growth and potential rise in NPLs; and underweights in Oil & Gas given potential impairments. Annual Review 2015 Manulife Investment-Linked Funds 4

7 market commentary EQUITY FUND (continued) local funds TOP 5 HOLDINGS As at 31 st December 2015 Top 5 Equity Holding Wgt% Public Bank Bhd 7.86% Malayan Banking Bhd 7.61% Tenaga Nasional Bhd 6.38% Top Glove Corp Bhd 5.82% Kossan Rubber Industries 4.80% ASSET ALLOCATION As at 31 st December 2015 Equities : % Cash : % Total : % Plantations % Infrastructure % Industrial Products % Finance % Technology % Trading/Services % Cash % Construction % Consumer Products % Management Fee Fund management fee of 1.50% is charged to the Fund during the year. It is calculated on a daily basis based on the net asset value of the Fund. Equity Fund is underwritten by Manulife Insurance Berhad. It was managed by CIMB-Principal Asset Management Berhad prior to 30 December Effective 30 December 2015, the fund manager has been changed to Manulife Asset Management Services Berhad. This report is prepared for information purposes only. Annual Review 2015 Manulife Investment-Linked Funds 5

8 market commentary MANAGED FUND local funds FUND OBJECTIVE The fund s investment objective is to provide investors with long term capital appreciation by investing in a range of equities, as well as enjoy the protection from a spread of fixed income securities. INVESTMENT REVIEW Equity We began 2015 amid a collapse in the crude oil market. Global markets were also volatile after the US Federal Reserve ended its Quantitative Easing program in the 4th quarter of Market sentiment recovered in January 2015 on the back of the confirmation that the European Central Bank (ECB) would embark on qualitative easing. Sentiment was lifted further when global oil prices rebounded in February. Locally, corporate earnings released during the month were not as bad as initially feared. While April started off on a strong note for Malaysia as the FBM100 ( Index ) rose to a 5-month high on the back of the stabilising Ringgit Malaysia (MYR) and oil prices, May saw the Index fall on the back of weak corporate results and heightened political concerns. The tabling of the 11th Malaysia Plan (11MP) on May 21 failed to excite the market. In June 2015, the Malaysian market continued to be weighed down by both external and internal risk factors such as; 1) Greece default risk, 2) US rate hike, 3) the impending Fitch decision on Malaysia s sovereign rating, 4) 1MDB s debt woes, and 5) foreign funds outflows. Fitch s eventual decision to revise Malaysia s sovereign rating to stable from negative failed to boost market sentiment. Investors remained cautious, as the market continued to be affected by local headwinds and foreign funds outflows. The situation was further aggravated by the China slowdown. The August reporting month saw the Index falling significantly by 835 points or 7.2% as Malaysian equities suffered from weak 2Q15 corporate earnings, as well as weak currency and capital outflows, which were fuelled by fears of capital controls. MYR weakened 8.6% against the USD in August alone, hitting a new high of on 26 August. But the market rebounded strongly in September on the back of some stability returning to regional markets and Wall Street, and news that the government was allocating RM20bn to ValueCAP to buy up good value stocks. In October, markets were further lifted by the Federal Reserve s dovish tones which implied a possible delay in rate lift off, as well as the European Central Bank s hint that it could extend easing. China s willingness for policy support also encouraged market stability and prompted some fund flows back into the Emerging Markets. This extended to November, where news about the sale of Edra s power assets to the Chinese, as well as China s commitment to buy Malaysian bonds helped support sentiment. December was a volatile month as the Index fell 2.6% before rebounding to add 158 points or 1.4% for the month. Oil prices dipped after the OPEC refrained from setting an official output target. Meanwhile, the much debated US Federal Reserve lift-off finally happened as interest rates were raised by 25 bps. For 2015, the Index shed 2.90%, closing the year at 11,470.6 points. Annual Review 2015 Manulife Investment-Linked Funds 6

9 market commentary MANAGED FUND (continued) local funds INVESTMENT REVIEW (continued) Fixed Income As widely expected Bank Negara Malaysia ( BNM ) kept its overnight policy rate ( OPR ) at 3.25% throughout the year stating that current stance of monetary policy remains supportive of growth despite downside risks to growth. In the latest Monetary Policy Meeting statement, BNM maintained its full year 2015 GDP forecast at 4.5%-5.5% due to the support of stronger domestic demand and private sector activity. BNM also commented that the Ringgit remains significantly undervalued and along with other regional currencies and will continue to face volatility due to the uncertainty in global growth and monetary conditions. Malaysia s economy growth momentum continued to be moderate as the economy grew by 5.7% year-on-year ( YoY ) in fourth quarter of FY2014 and 5.6% YoY in the first quarter of FY2015 as private sector growth and public consumption remained the key driver of growth during these two quarters while exports continued to contract despite the weakening of the Ringgit and weak commodity prices. However, the growth momentum slowed down slightly as the economy advanced by 4.9% YoY in the second quarter of 2015 and by 4.7% in the third quarter. Third quarter growth was the weakest expansion since second quarter 2013, as a rebound in exports was unable to offset a slowdown in private and public consumption. Exports grew only by 3.2%, following a 3.7% drop in the preceding quarter, while Imports rose 3.2%, after registering a 2.8% rise in April to June. On the expenditure side, private consumption grew by 4.1% YoY, slowing from a 6.4% growth in the previous quarter, as households continued to adjust the implementation of the Goods and Services Tax ( GST ). Public consumption expanded by 3.5%, slowing from a 6.8% growth in the June quarter, due to slower growth in both emoluments and supplies and services expenditure. On the inflation front, headline inflation rate remained stable during the period under review as Consumer Price Index ( CPI ) trended lower in the second half of FY2014 from 3% in November 2014 to bottom at 0.1% YoY in February 15 due to the lower fuel costs as the Government reduced RON95 price by 4 cents in December 2014 and 35 cents in January Subsequently, inflation rate continued to trend higher due to the implementation of Government Service Tax ( GST ) in April 15 and peaked at 3.3% in July from 2.5% in June as fuel prices for RON95, RON97 and diesel was increased by 10 cent during the month. However, Consumer Price Index ( CPI ) has been easing recently as CPI decrease to 3.1% in August 15 and 2.6% in September 15 as fuel prices was revised downwards by 10 cent during these respective months. Inflation continued to ease to 2.5% in October 15 due to downward price pressure during monthly mainly came from decline in cost of transport (-5.7% YoY) which was partially offset by the rise in food & nonalcoholic beverages (+4.7% YoY) and alcoholic beverages & tobacco (+13.3% YoY). MGS rallied in the first few months of FY2015 due to strong buying interest from the local investors ignoring the falling oil prices and also the weakening Ringgit. The rally was shortly lifted as the MGS market experienced huge volatility reflecting the turmoil seen in global bond markets due to the Eurozone dilemma with Greece and a probable negative credit rating action by Fitch on Malaysia was being priced in by the market. Furthermore, the domestic bond market experience huge volatility as Fed decided to postpone its rate hike in September to December. Annual Review 2015 Manulife Investment-Linked Funds 7

10 market commentary MANAGED FUND (continued) local funds INVESTMENT REVIEW (continued) Fixed Income (continued) As a result, MGS yield curve bull steepened during the period as yields were traded lower by 36-83bps lower for the 5-years and below while the yields for the 7-years and above increased by 1-14bps higher. The benchmark MGS yields for 3-, 5-, 7-, 10- and 15-year ended at 3.24%, 3.48%, 4.09%, 4.21% and 4.60% respectively. On the other hand, corporate bond yields were traded higher slightly higher by 1-17bps most tenures for the AAA and AAs segments. As result, Corporate bond yields and sovereign yields have tightened for 5-years and below while 7-years and above saw credit spreads widened. OUTLOOK Equity Global equity markets opened 2016 with an unanticipated correction. However, this volatility in our view is a temporary disconnect between equity markets and economic fundamentals. Over in China, the loss of confidence over Renminbi (RMB) devaluation triggered a major market selloff; and not so reflecting the underlying economic growth, especially when Chinese government was taking steps to reform the economy; and services sector continued to grow strongly. Increased in public spending with monetary easing by People s Bank of China (PBoC) are positives for a stable economy. Macro risks of concern including higher US interest rates, a strengthening USD, falling commodity prices and potential high yield credit defaults are bad news already priced in and should weigh less on markets going forward. Global Purchasing Manager s Index for developed economies remains healthy, suggesting decent growth ahead in Though emerging market PMI is weaker, but is more neutral than contractionary. The US, Europe and Japan are all forecast to see improved GDP growth in This will support uneven recovery in emerging markets economies. The US economic headwinds should fade as tailwinds from the housing sector, cheap gasoline and wage growth support consumer spending and continued economic expansion. With this, Fed may not raise interest rate too aggressively. Meanwhile, Europe economic data are improving. The local market, we are seeing decoupling signs of the equity market from Ringgit and crude oil weaknesses. Uncertainties around the policy in Malaysia was reduced with the recalibration of 2016 Budget and rectification of Trans-Pacific Partnership (TPP). That said, transition with sharper spending cuts may pose near term growth risks. In an environment still driven by short-term uncertainties, we remain focus on growth and income strategy, focusing on stocks with strong balance sheets and sustainable cash flows. Annual Review 2015 Manulife Investment-Linked Funds 8

11 market commentary MANAGED FUND (continued) local funds OUTLOOK (continued) Fixed Income With US first rate hike out of the way, the market s attention is likely to shift towards the pace of rate hikes in 2016 and worries of slower global economic growth. In the US, rate hike decisions are driven not only by the status of its own economic growth but also by its inflation level, global growth, appreciation of USD vs other major currencies as well as commodity price trends. Given all the headwinds, we expect a very gradual hiking cycle. For Malaysia, we remain watchful on the country s GDP growth as exports may be dragged by weak global trades and low commodity prices. More sluggish growth and high living costs due to weaker MYR as well as hike in toll rates, LRT fares and electricity tariff may also have a negative impact on domestic demand. Local inflation level is expected to remain manageable as a result of low energy prices and tepid consumer demand despite expectation of upward pressure on inflation from the weak MYR and the abovementioned price hikes. Lower commodity prices may offset inflation but this is a double-edged sword given that government revenue will be affected. BNM viewed the current OPR of 3.25% as accommodative and supportive of economic activity. For the time being, we do not think that the external and internal environment warrants any change to the OPR just yet. This brings us back to oil price and MYR performance as key drivers for the local bond market in STRATEGY Equity In an environment still driven by short-term uncertainties, we remain focus on growth and income strategy, focusing on stocks with strong balance sheets and sustainable cash flows. We remained underweights in Banks in view of moderating loans growth and potential rise in NPLs; and underweights in Oil & Gas given potential impairments. Fixed Income Going forward, we intend to take profit on some short term PDS and look for opportunities to reinvest in better value papers. We may also trade government bonds to enhance portfolio returns. Annual Review 2015 Manulife Investment-Linked Funds 9

12 market commentary MANAGED FUND (continued) local funds TOP 5 HOLDINGS As at 31 st December 2015 TOP 5 CORE EQUITY HOLDINGs wgt% Malayan Banking Bhd 6.61% Public Bank Bhd 6.02% Tenaga Nasional Bhd 5.51% Top Glove Corp Bhd 4.24% Kossan Rubber Industries 3.92% TOP 5 CORE FIXED INCOME HOLDINGs wgt% Bumitama Agri Ltd 2.72% Malaysia Government Bond 2.72% Sports Toto Malaysia Sdn Bhd 2.15% N.U.R Power Bhd 2.13% Hong Leong Bank Bhd 2.12% ASSET ALLOCATION As at 31 st December 2015 Equities : 64.74% Bond : 20.43% Cash : 14.83% Total : % Construction % Cash % Trading/Services % Technology % Plantation % Consumer Products % Finance % Fixed Income % Industrial Products % Infrastructure % Management Fee Fund management fee of 1.35% is charged to the Fund during the year. It is calculated on a daily basis based on the net asset value of the Fund. Managed Fund is underwritten by Manulife Insurance Berhad. It was managed by CIMB-Principal Asset Management Berhad prior to 30 December Effective 30 December 2015, the fund manager has been changed to Manulife Asset Management Services Berhad. This report is prepared for information purposes only. Annual Review 2015 Manulife Investment-Linked Funds 10

13 market commentary income FUND local funds FUND OBJECTIVE The Fund s investment objective is to provide investors a steady return through accumulation of capital over the long term. It is suitable for investors seeking stability of principal and a higher return compared to bank deposits but with an acceptance risk to capital invested. INVESTMENT REVIEW During the period under review, the US Treasuries (UST) yield curve bear flattened. During this period, the 2-year UST yield climbed 34 bps, driven by expectations of interest rate hikes by the Federal Reserve (the Fed) as the US economy steadily improves. Longer-dated UST yields also rose although the quantum was less than that for the 2-year UST; the 5-year, 10-year and 30- year UST yields rose 7 bps, 6 bps and 19 bps year-on-year (yoy). After months of intense speculation, the Fed finally raised the Feds Fund Rate by 25 bps in December 2015, more than a year after its Quantitative Easing (QE) programme ended. Recovery in the US labor market had been modest but resilient: unemployment has fallen to 5% while the nonfarm payrolls headline figures have been robust, particularly towards the end of the year. While the US embarked on its journey to recovery and tighter monetary policy, many emerging markets (EM) went the opposite direction. Bank of Japan (BoJ), People s Bank of China (PBoC) and numerous other Asian central banks eased monetary policy amid worries of economic slowdown. Asia ex-japan s aggregate GDP growth slowed from 6.2% yoy in 1Q 2015 to 6.0% in 2Q and 3Q of 2015, and is expected to moderate further in 4Q2015. The Eurozone, while showing relatively flattish economic growth, also launched fresh series of QE and remained committed to a loose monetary policy to support growth. Aside from rate hike expectations in the US, world economy and financial markets were also rocked by volatile currency fluctuations and low commodity/energy prices during the year. Countries with high export exposure to other EM and high exposure to commodities were among the hardest hit. In Malaysia, the Malaysian Government Security (MGS) yield curve steepened, with the 3-year and 5-year MGS yields down 14 bps and 21 bps yoy, respectively. Yields of long-dated MGS increased between 2 and 11 bps. Corporate bond yields, especially for long-dated bonds, ended the year higher in line with movements in MGS as well as a reflection of general market uncertainties. Credit spreads remained flattish for short-dated corporate bonds but widened for longer-term credits. The overall market direction and high volatility was generally a reflection of weak market sentiment and more dovish monetary policy outlook in Malaysia. Duration-shortening trades prevailed, particularly in the second half of the financial year as the market was plagued by concerns over Malaysia s fiscal position amid the weak global commodity price, drastic depreciation of the MYR (MYR depreciated close to 23% against USD during the financial year) as well as domestic political noises. Annual Review 2015 Manulife Investment-Linked Funds 11

14 market commentary income FUND (continued) local funds OUTLOOK With US first rate hike out of the way, the market s attention is likely to shift towards the pace of rate hikes in 2016 and worries of slower global economic growth. In the US, rate hike decisions are driven not only by the status of its own economic growth but also by its inflation level, global growth, appreciation of USD vs other major currencies as well as commodity price trends. Given all the headwinds, we expect a very gradual hiking cycle. For Malaysia, we remain watchful on the country s GDP growth as exports may be dragged by weak global trades and low commodity prices. More sluggish growth and high living costs due to weaker MYR as well as hike in toll rates, LRT fares and electricity tariff may also have a negative impact on domestic demand. Local inflation level is expected to remain manageable as a result of low energy prices and tepid consumer demand despite expectation of upward pressure on inflation from the weak MYR and the abovementioned price hikes. Lower commodity prices may offset inflation but this is a doubleedged sword given that government revenue will be affected. BNM viewed the current OPR of 3.25% as accommodative and supportive of economic activity. For the time being, we do not think that the external and internal environment warrants any change to the OPR just yet. This brings us back to oil price and MYR performance as key drivers for the local bond market in One of the major concerns about Malaysia s economy was the impact of low oil price to the country s fiscal position, government s revenue and GDP growth. Despite the revision of Malaysia s sovereign rating outlook from negative to stable by Fitch end of June 2015, plunging MYR and renewed slump in oil prices triggered further market weaknesses. The worsening market conditions culminated in a broad bond selloff in August Malaysia registered GDP growth of +5.6% yoy in 1Q 2015, +4.9% yoy in 2Q 2015 and +4.7% yoy in 3Q The weakening trend was caused by a combination of factors which include the introduction of Goods and Services tax (GST) in April, low commodity prices and generally weak global economy. During the announcement of the country s official budget for 2016, the government lowered its GDP growth forecast for 2016 from 4.5%-5.5% to 4.0%-5.0%. It also revised its fiscal deficit target to 3.1% of GDP, from the 3.0% targeted previously, signalling a slower pace of fiscal consolidation amid declining oil-related revenue; brent crude oil price slumped almost 45% from USD66.7 per barrel to USD36.7 per barrel this year. Meanwhile, Malaysia s Consumer Price Index remained manageable despite the introduction of GST and the depreciation MYR (+2.6% yoy in November 2015 and averaging +2.0% year to date November 2015). Amid this backdrop, Bank Negara Malaysia had kept the Overnight Policy Rate (OPR) unchanged at 3.25% throughout Annual Review 2015 Manulife Investment-Linked Funds 12

15 market commentary income FUND (continued) local funds STRATEGY Going forward, our strategy for the Fund is to maintain a neutral duration position, favour investment grade corporate bonds for better yield pick up and opportunistic trades arising from the volatile market. portfolio statement Net Book Value Market Value % on Securities (RM) (RM) Net Asset Value Corporate Bonds - Unquoted & Unsecured 20,738, ,518, Government Guaranteed Bonds 1,695, ,629, Total 22,433, ,147, TOP 5 HOLDINGS As at 31 st December 2015 Coupon Top 5 Bond Holdings Maturity Wgt% 5.1% Krung Thai Bank PCL/Cayman Islands 4-Jul % 8.65% Jimah Energy Ventures Sdn Bhd 10-Nov % 5.3% GB Services Bhd 8-Nov % 5.45% BGSM Management Sdn Bhd 28-Jun % 4.76% Aquasar Capital Sdn Bhd 16-Jul % Annual Review 2015 Manulife Investment-Linked Funds 13

16 market commentary income FUND (continued) local funds ASSET ALLOCATION As at 31 st December 2015 Bonds : 89.63% Cash & Deposits : 10.37% Total : % Cash & Deposits % Bonds % Management Fee Fund management fee of 0.75% is charged to the Fund during the year. It is calculated on a daily basis based on the net asset value of the Fund. Income Fund is underwritten by Manulife Insurance Berhad and is managed by the Manulife Asset Management Services Berhad. This report is prepared for information purposes only. Annual Review 2015 Manulife Investment-Linked Funds 14

17 market commentary Dana Ekuiti Dinamik local funds FUND OBJECTIVE Dana Ekuiti Dinamik s investment objective is to maximize medium to long term capital appreciation by investing in Shariah compliant equity and equity-related securities listed on the Bursa Malaysia. INVESTMENT REVIEW We began 2015 amid a collapse in the crude oil market. Global markets were also volatile after the US Federal Reserve ended its Quantitative Easing program in the 4th quarter of Market sentiment recovered in January 2015 on the back of the confirmation that the European Central Bank (ECB) would embark on qualitative easing. Sentiment was lifted further when global oil prices rebounded in February. Locally, corporate earnings released during the month were not as bad as initially feared. While April started off on a strong note for Malaysia as the FTSE Bursa Malaysia Emas Shariah Index ( Index ) rose to a 5-month high on the back of the stabilising Ringgit Malaysia (MYR) and oil prices, May saw the Index fall on the back of weak corporate results and heightened political concerns. The tabling of the 11th Malaysia Plan (11MP) on May 21 failed to excite the market. In June 2015, the Malaysian market continued to be weighed down by both external and internal risk factors such as; 1) Greece default risk, 2) US rate hike, 3) the impending Fitch decision on Malaysia s sovereign rating, 4) 1MDB s debt woes, and 5) foreign funds outflows. Fitch s eventual decision to revise Malaysia s sovereign rating to stable from negative failed to boost market sentiment. Investors remained cautious, as the market continued to be affected by local headwinds and foreign funds outflows. The situation was further aggravated by the China slowdown. The August reporting month saw the Index falling significantly by 930 points or 7.5% as Malaysian equities suffered from weak 2Q15 corporate earnings, as well as weak currency and capital outflows, which were fuelled by fears of capital controls. MYR weakened 8.6% against the USD in August alone, hitting a new high of on 26 August. But the market rebounded strongly in September on the back of some stability returning to regional markets and Wall Street, and news that the government was allocating RM20bn to ValueCAP to buy up good value stocks. In October, markets were further lifted by the Federal Reserve s dovish tones which implied a possible delay in rate lift off, as well as the European Central Bank s hint that it could extend easing. China s willingness for policy support also encouraged market stability and prompted some fund flows back into the Emerging Markets. This extended to November, where news about the sale of Edra s power assets to the Chinese, as well as China s commitment to buy Malaysian bonds helped support sentiment. December was a volatile month as the Index fell 2.3% before rebounding to add 294 points or 2.3% for the month. Oil prices dipped after the OPEC refrained from setting an official output target. Meanwhile, the much debated US Federal Reserve lift-off finally happened as interest rates were raised by 25 bps. For 2015, the Index gained 2.30%, closing the year at 12,800.6 points. Annual Review 2015 Manulife Investment-Linked Funds 15

18 market commentary Dana Ekuiti Dinamik (continued) local funds OUTLOOK Global equity markets opened 2016 with an unanticipated correction. However, this volatility in our view is a temporary disconnect between equity markets and economic fundamentals. Over in China, the loss of confidence over Renminbi (RMB) devaluation triggered a major market selloff; and not so reflecting the underlying economic growth, especially when Chinese government was taking steps to reform the economy; and services sector continued to grow strongly. Increased in public spending with monetary easing by People s Bank of China (PBoC) are positives for a stable economy. Macro risks of concern including higher US interest rates, a strengthening USD, falling commodity prices and potential high yield credit defaults are bad news already priced in and should weigh less on markets going forward. Global Purchasing Manager s Index for developed economies remains healthy, suggesting decent growth ahead in Though emerging market PMI is weaker, but is more neutral than contractionary. The US, Europe and Japan are all forecast to see improved GDP growth in This will support uneven recovery in emerging markets economies. The US economic headwinds should fade as tailwinds from the housing sector, cheap gasoline and wage growth support consumer spending and continued economic expansion. With this, Fed may not raise interest rate too aggressively. Meanwhile, Europe economic data are improving. The local market, we are seeing decoupling signs of the equity market from Ringgit and crude oil weaknesses. Uncertainties around the policy in Malaysia was reduced with the recalibration of 2016 Budget and rectification of Trans-Pacific Partnership (TPP). That said, transition with sharper spending cuts may pose near term growth risks. STRATEGY In an environment still driven by short-term uncertainties, we remain focus on growth and income strategy, focusing on stocks with strong balance sheets and sustainable cash flows. We remained underweights in Banks in view of moderating loans growth and potential rise in NPLs; and underweights in Oil & Gas given potential impairments. TOP 5 HOLDINGS As at 31 st December 2015 Top 5 Equity Holding Wgt% Tenaga Nasional Bhd 8.65% DiGi.Com Bhd 6.53% Malakoff Corp Bhd 6.19% Top Glove Corp Bhd 5.27% Fraser & Neave Holdings Bhd 4.99% Annual Review 2015 Manulife Investment-Linked Funds 16

19 market commentary Dana Ekuiti Dinamik (continued) local funds ASSET ALLOCATION As at 31 st December 2015 Equities : 86.47% Cash : 13.53% Total : % Properties % Plantations % Infrastructure % Industrial Products % Finance % Technology % Trading/Services % Cash % Construction % Consumer Products % Management Fee Fund management fee of 1.50% is charged to the Fund during the year. It is calculated on a daily basis based on the net asset value of the Fund. Dana Ekuiti Dinamik is underwritten by Manulife Insurance Berhad. It was managed by CIMB- Principal Asset Management Berhad prior to 30 December Effective 30 December 2015, the fund manager has been changed to Manulife Asset Management Services Berhad. This report is prepared for information purposes only. Annual Review 2015 Manulife Investment-Linked Funds 17

20 market commentary Manulife Flexi Invest Fund local funds FUND OBJECTIVE Manulife Flexi Invest Fund s investment objective is to provide medium-to-long-term capital appreciation. The Fund may invest between 0-100% of the Fund s NAV in equities and equityrelated instruments and/or fixed income securities (including but not limited to money market instruments and other liquid assets.) The Fund may also invest up to 30% into foreign markets. INVESTMENT REVIEW 2015 began actively with a slew of developments. The European Central Bank finally kicked-off its larger-than-expected quantitative easing program. The US corporates posted a somewhat disappointing earnings reporting season, though the market remained well-supported by mergers and acquisitions activities and the pushback of interest rate hike in the US. China s central bank announced a cut in the reserve requirement ratio causing the Chinese market to experience a liquidity-driven rally. With flushed liquidity regionally, the FBM KLCI reached a high of 1,862.8 points in April 2015 on the back of rebounding crude oil & easing USD. However, the rally did not last as heavy funds outflows were observed in anticipation of the first US interest rate hike since Apart from that, global economic data were uninspiring as major economies of the Eurozone, China and Japan continued to struggle for growth. Only the US continued to be the exception. The weak sentiment was exacerbated by a surprise devaluation of the Renminbi, triggering fears that China could go into a hard landing. FBM KLCI suffered its worst pullback in August 2015 as the index broke below its two crucial psychological support levels at 1,600 to reach a period low of 1, on 24 August It was only after the government s announcement that RM20bn will be allocated to buy undervalued shares, the market found a near-term downside support. The US Federal Open Market Committee (FOMC) rate hike in December lifted market sentiment for a short while before bearish sentiment took over as investors refocus impact of low crude oil prices. By the end of the period and 2015, the FBM KLCI, and FBM 100 registered a decline of 3.9%, and 2.9% year-on-year respectively. From RM3.49/US Dollar in early January, the MYR weakened 23% to RM4.29 by end December Not surprisingly, sectors that were badly hit were the heavy-weighted sectors like the financials/banks and oil & gas whilst 2015 performers were mainly the exporters. Annual Review 2015 Manulife Investment-Linked Funds 18

21 market commentary Manulife Flexi Invest Fund (continued) local funds OUTLOOK As we move into 2016, we expect to see another volatile year for the equity markets worldwide as uncertainties in the major economies, especially China continue to cause uneasiness among investors. The bright spot is that most of the major economies still have room to pursue monetary and fiscal stimulus to support global growth. Furthermore, pace of interest rate normalisation by FOMC indicates that they are still confident of a sustainable and durable US economy recovery which will eventually benefit emerging economies. The local economy may continue to feel the brunt of 2015 woes albeit at a diminishing extent. Moreover, with lower corporate tax rates and potential recovery of the Ringgit, this might lead to pick up in corporate earnings which in turn could rerate the market. That said, the local market will be subjected to volatility as it will continue to take cue from what happens around the region. STRATEGY We expect to see heightened volatility in the market until oil price and other external factors stabilise and fundamentals prevail. In a market condition that is largely driven by investor sentiments, there will be opportunity to capitalise on large valuation gaps; companies where fundamentals continue to remain intact but share prices declined significantly. Moreover, we remain steadfast with our growth and income strategy, focusing on stocks with strong balance sheet and sustainable growth. TOP 5 HOLDINGS As at 31 st December 2015 Top 5 Equity Holding Wgt% Pestech International Bhd 5.00% Genting Bhd 3.33% Karex Bhd 3.30% Time DotCom Bhd 3.13% MISC Bhd 2.91% Annual Review 2015 Manulife Investment-Linked Funds 19

22 market commentary Manulife Flexi Invest Fund (continued) local funds ASSET ALLOCATION As at 31 st December 2015 Equities : 92.64% Cash : 7.36% Total : % Trading/Services % Technology % Properties % Plantations % Infrastructure % Industrial Products % Foreign % Cash % Constructions % Consumer Products % Finance % Management Fee Fund management fee of 1.50% is charged to the Fund during the year. It is calculated on a daily basis based on the net asset value of the Fund. Manulife Flexi Invest Fund is underwritten by Manulife Insurance Berhad and is managed by the Manulife Asset Management Services Berhad. This report is prepared for information purposes only. Annual Review 2015 Manulife Investment-Linked Funds 20

23 market commentary Manulife Progress Fund local funds FUND OBJECTIVE Manulife Progress Fund (MPF) aims to achieve long term capital growth at a reasonable level of risk by investing in a diversified portfolio of small to medium-sized public-listed companies listed on the Bursa Malaysia. MPF is a feeder fund and invests at least 95% of its Net Asset Value in Manulife Investment Progress Fund (MIPF). INVESTMENT REVIEW 2015 began actively with a slew of developments. The European Central Bank finally kicked-off its larger-than-expected quantitative easing program. The US corporates posted a somewhat disappointing earnings reporting season, though the market remained well-supported by mergers and acquisitions activities and the pushback of interest rate hike in the US. China s central bank announced a cut in the reserve requirement ratio causing the Chinese market to experience a liquidity-driven rally. With flushed liquidity regionally, the FBM KLCI reached a high of 1,862.8 points in April 2015 on the back of rebounding crude oil & easing USD. However, the rally did not last as heavy funds outflows were observed in anticipation of the first US interest rate hike since Apart from that, global economic data were uninspiring as major economies of the Eurozone, China and Japan continued to struggle for growth. Only the US continued to be the exception. The weak sentiment was exacerbated by a surprise devaluation of the Renminbi, triggering fears that China could go into a hard landing. FBM KLCI suffered its worst pullback in August 2015 as the index broke below its two crucial psychological support levels at 1,600 to reach a period low of 1, on 24 August It was only after the government s announcement that RM20bn will be allocated to buy undervalued shares, the market found a near-term downside support. The US Federal Open Market Committee (FOMC) rate hike in December lifted market sentiment for a short while before bearish sentiment took over as investors refocus impact of low crude oil prices. By the end of the period and 2015, the FBM KLCI, FBM 70, and FBM Small Cap registered growth of -3.9%, 0.5%, and 6.0% year-on-year respectively. From RM3.49/US Dollar in early January, the MYR weakened 23% to RM4.29 by end December Not surprisingly, sectors that were badly hit were the heavy-weighted sectors like the financials/banks and oil & gas whilst 2015 performers were mainly the exporters. Annual Review 2015 Manulife Investment-Linked Funds 21

24 market commentary Manulife Progress Fund (continued) local funds OUTLOOK As we move into 2016, we expect to see another volatile year for the equity markets worldwide as uncertainties in the major economies, especially China continue to cause uneasiness among investors. The bright spot is that most of the major economies still have room to pursue monetary and fiscal stimulus to support global growth. Furthermore, pace of interest rate normalisation by FOMC indicates that they are still confident of a sustainable and durable US economy recovery which will eventually benefit emerging economies. The local economy may continue to feel the brunt of 2015 woes albeit at a diminishing extent. Moreover, with lower corporate tax rates and potential recovery of the Ringgit, this might lead to pick up in corporate earnings which in turn could rerate the market. That said, the local market will be subjected to volatility as it will continue to take cue from what happens around the region. STRATEGY We expect to see heightened volatility in the market until oil price and other external factors stabilise and fundamentals prevail. In a market condition that is largely driven by investor sentiments, there will be opportunity to capitalize on large valuation gaps; companies where fundamentals continue to remain intact but share prices declined significantly. Moreover, we remain steadfast with our growth and income strategy, focusing on stocks with strong balance sheet and sustainable growth. TOP 5 HOLDINGS (Manulife Investment Progress Fund) As at 31 st December 2015 Top 5 Equity Holding Wgt% Pestech International Bhd 5.20% Kawan Food Bhd 3.54% SCGM Bhd 3.26% Harbour-Link Group Bhd 3.08% Muda Holdings Bhd 3.03% Annual Review 2015 Manulife Investment-Linked Funds 22

25 market commentary Manulife Progress Fund (continued) local funds ASSET ALLOCATION (Manulife Investment Progress Fund) As at 31 st December 2015 Equities : 78.81% Cash : 21.19% Total : % Properties % Plantations % Infrastructure % Industrial Products % Finance % Consumer Products % Technology % Trading/Services % Cash % Constructions % Management Fee Fund management fee of 1.50% is charged to the Fund during the year. It is calculated on a daily basis based on the net asset value of the Fund. Manulife Progress Fund is underwritten by Manulife Insurance Berhad. The investment reviews are on Manulife Investment Progress Fund (MIPF). Manulife Progress Fund and MIPF are managed by Manulife Asset Management Services Berhad. This report is prepared for information purposes only. Annual Review 2015 Manulife Investment-Linked Funds 23

26 market commentary Manulife Emerging Eastern Europe Fund foreign funds Fund Objective Manulife Emerging Eastern Europe Fund aims to achieve capital growth through investment, primarily in securities listed or traded on the stock exchanges of Central and Eastern European countries. It is intended that the Fund will concentrate on securities traded on stock exchanges in the Czech Republic, Hungary, Poland, Slovakia and Russia whilst such securities may also be listed in other exchanges as depository receipts or certificates, or in other forms of instruments. However, the Fund will seek to broaden its participation in other markets within the region as they develop. Manulife Emerging Eastern Europe Fund is a feeder fund that invests in Manulife Global Fund-Emerging Eastern Europe A Share. Portfolio Review Although falling in absolute terms, the sub-fund generated a strong relative performance over the period under review. This was largely due to its stock selection, particularly in Russia but also, to a lesser extent, in Turkey. Key positive contributors to performance included the Russian supermarket group X5 Retail; although not immune from consumer weakness X5 continues to benefit from a store refurbishment program and improving logistics, which have driven traffic growth ahead of the overall market. Shares in X5 rose by more than 50% over the full year. Russian energy group Surgutneftegas also added value as the company continued to benefit from the weaker rouble, with its US dollar cash position in excess of USD 35 billion. This is not only a well-managed oil company but also one that provides the perfect hedge against rouble weakness. Although the sub-fund s exposure to the oil industry was reduced over the period under review, with a number of smaller exploration firms divested, the decision to maintain some exposure to the most attractively valued of these, Bankers Petroleum, which has operations in Albania, was a significant drag on performance over the period as its share price fell heavily on the back of the lower oil price. The sub-fund s holdings amongst London-listed central European companies, including the consumer lender International Personal Finance, were a further drag. Changes to the sub-fund s portfolio over the period under review included the complete divestment of all positions in Greece, prior to the imposition of capital controls. This was balanced by an increased exposure to the Russian market, which now has a significant overweight position in the portfolio. Exposure to Turkey remains overweight. At the sector level, exposure to energy companies was substantially reduced, leading to a significant underweight exposure to this sector. Within the consumer sectors, the weighting in the more defensive consumer staples sector was increased at the expense of the more cyclical consumer discretionary sector. Amongst stock changes, one notable addition was the Turkish financials group Akbank. This followed a secondary share offering in which Citi sold out of its remaining stake in the company. Akbank had underperformed partly in anticipation of this share sale despite its strong earnings momentum and healthy balance sheet. Annual Review 2015 Manulife Investment-Linked Funds 24

27 market commentary foreign funds Manulife Emerging Eastern Europe Fund (continued) market PORTFOLIO Emerging Eastern European markets were generally weaker in Much, though not all, of this performance could be ascribed to the weakness of local currencies against a stronger US dollar. The Greek market lost almost two-thirds of its value over the year and has effectively become un-investable for the time being. Kazakhstan fell sharply as a result of a currency devaluation. Despite the overall weaker trend, the Russian stockmarket managed to hold on to a small calendar year gain after losses towards the end of the period on the back of further oil price weakness failed to overturn completely the gains achieved earlier in the year as share prices in Moscow bounced back strongly from prior weakness. International sanctions against Russia for its part in the continuing conflict in Ukraine remained in place but as this conflict slipped off the news agenda with little sign of any resolution, there was little further impact on share prices in Russia. If Russia, as a producer, loses from a lower oil price then Turkey, as a consumer, usually gains. Yet even given a 40% fall in the price of oil over 2015, the Borsa Istanbul still closed the year with heavy losses as the mid-year general election dominated financial markets. The result of this election was inconclusive, with the ruling AK Party failing to win an outright majority. Subsequent coalition talks failed and a second election was called. Somewhat against expectations, and following an upsurge in violence both against local Kurds and across the border in Syria, the AK Party was returned to power in the second poll for its fourth consecutive term in office with an absolute majority. This has now paved the way for President Erdogan to push for constitutional change to furnish the presidential office with more executive powers, with further moves in this direction likely during the course of With Turkey lacking effective economic leadership for much of the year, and with little certainty over who would be running the country over coming years, share prices reacted negatively. Politics were also a major consideration in Poland where the ultra-nationalist Law and Justice party won the parliamentary elections in November and has since brought large parts of the state-owned media under its direct control as well as continuing to work on a new banking and retail tax. Markets reacted negatively both in the run-up to the election and to the result itself, with share prices in Warsaw losing around a quarter of their value over the year. Annual Review 2015 Manulife Investment-Linked Funds 25

28 market commentary foreign funds Manulife Emerging Eastern Europe Fund (continued) market Outlook The fortunes of the Russian stockmarket are inextricably linked to the oil price. The current oversupply of oil appears to be unsustainable and as the most expensive production is taken off the market, Russia is likely to be amongst the key beneficiaries. International sanctions on Russia, imposed as a result of its involvement in Ukraine, can be expected to remain in place for some time to come but are unlikely to be extended beyond the current individuals and companies. Overall, the sense is that the stockmarket is now beginning to price in an improved macroeconomic outlook in 2016 driven by both actual improvements in the economy and base effects which will inevitable make 2016 numbers look better than This should be broadly supportive for the market over the year. The Turkish stockmarket enters 2016 on an optimistic note. On the positive side, no further significant elections are scheduled until 2019 and Turkey can now look forward to the stability of a strong single party government with a renewed commitment to structural reform. Depressed oil prices, a better earnings outlook, the potential for macroeconomic policy to foster growth and attractive valuations should all be supportive of a better outlook for share prices in Conversely, the independence of the central bank continues to be challenged by the government, leading to a lack of visibility over interest rate policy. Elsewhere, the potential for further US interest rate hikes, tensions with Russia and the ongoing conflict in the Kurdish regions remain clear risks that may have some impact on share prices over the course of the year. Elsewhere across the region, international developments concerning commodity prices, US interest rate policy and the strength of the global economy, with a focus on China, are likely to continue to dominate stockmarkets. TOP 5 HOLDINGS As at 31 st December 2015 Wgt% LUKOIL 8.9% Surgutneftegas 7.4% Garanti Bank 6.4% PKO Bank Polski 5.4% X5 Retail Group 5.1% Annual Review 2015 Manulife Investment-Linked Funds 26

29 market commentary foreign funds Manulife Emerging Eastern Europe Fund (continued) ASSET ALLOCATION As at 31 st December 2015 Sector Exposure Energy % Con Staples % Materials - 6.7% Industrials - 5.7% Financials % Utilities - 2.0% Telecoms - 2.0% Cash - 2.1% IT - 3.0% Con Discretionary - 5.6% Geographic Exposure Cash - 2.1% Turkey % Russia % Albania - 0.8% Czech Republic - 1.7% Hungary - 2.0% Kazakhstan - 2.6% Poland % Romania - 2.3% Management Fee Fund management fee of 1.50% is charged to the Fund during the year. It is calculated on a daily basis based on the net asset value of the Fund. Manulife Emerging Eastern Europe Fund is a feeder fund which feeds into the Manulife Global Fund - Emerging Eastern Europe Fund A Share (MGF-EEEF). The investment reviews are on MGF- EEEF. Manulife Emerging Eastern Europe Fund is managed by Manulife Asset Management Services Berhad while MGF-EEEF is managed by Charlemagne Capital (UK) Limited. This report is prepared for information purposes only. Annual Review 2015 Manulife Investment-Linked Funds 27

30 market commentary MANULIFE CHINA VALUE FUND foreign funds FUND OBJECTIVE Manulife China Value Fund aims to achieve long-term capital growth through investment, primarily in companies with substantial business interests in the Greater China Region (which includes People s Republic of China, Hong Kong and Taiwan) which are listed on stock exchanges of Shanghai, Shenzhen, Hong Kong, Taipei or other overseas exchanges and which are currently under-valued but may have long term potential. Manulife China Value Fund is a feeder fund that invests in Manulife Global Fund-China Value Fund A Share. Portfolio Review The Chinese stockmarket edged up in the first half of However, weighed by concerns on the potential exit of government rescue measures and a slowing economy, China s onshore A-share markets reached their 2015 high before the middle of June and then retreated. Given the bearish backdrop, the sub-fund made a net loss of 5.4% for the 12 months ended 31 December For reference, the FTSE Greater China Index lost 6.8% over the same period. The sub-fund outperformed the market (represented by the FTSE Greater China Index) primarily because of its stock selection in the industrial and technology sectors. In terms of stock performances, a Chinese developer contributed the most to the sub-fund s return in the period while a Chinese oil and gas producer was the main detractor. Sector-wise, the sub-fund s holdings in the industrial sector contributed the most to performance, while the biggest lagging sector was oil and gas. During the review period, the portfolio manager added stakes in the industrials and financials sectors while trimming positions in the oil and gas and consumer goods sectors. Relative to the benchmark, the sub-fund s largest overweighting was in oil and gas, health care and utilities, while technology was the sub-fund s top underweighting sector. Market Review The Chinese stockmarket witnessed a rally in the first half of 2015 before a major correction took place in June. As investors were worried about China s growth slowdown and became too pessimistic, the upward momentum in China s stockmarket reversed in the third quarter and valuations in some markets have dropped below their trough levels during the Global Financial Crisis in During the second half of 2015, the FTSE Greater China Index declined 16.4%, paring off most of the gains in the first six months. Annual Review 2015 Manulife Investment-Linked Funds 28

31 market commentary MANULIFE CHINA VALUE FUND (continued) foreign funds Market Review (continued) Having seen the slump in the domestic stockmarket, the Chinese government announced a series of stabilisation measures, such as reducing share transaction costs by 30%, abolishing mandatory levels for margin calls, expanding financing channels for brokers, and suspending new initial public offerings ( IPOs ). Investor sentiment stabilised towards the end of 2015 on a series of stimulus measures. The People s Bank of China ( PBoC ) announced on 23 October to cut the one-year lending and deposit rates by 25 basis points and reserve requirement ratio ( RRR ) by 50 basis points. Since November 2014, there have been six interest rate cuts and four RRR cuts. As a result, one-year benchmark deposit rate was cut by 150 basis points and lending rate by 165 basis points, while the RRR was reduced by 250 basis points. It is true that China s economy has weakened substantially and the portfolio manager continue to see fatigues in the old economy sectors China s National Bureau of Statistics manufacturing PMI remained in contractionary territory for the fifth-straight month in December, pointing to slowing industrial activities in China. However, there are increasing signs that activities may have started to stabilise, e.g. housing prices are steadying and retail sales are strengthening. Besides, new economic indicators including movie box office, the number of airline passengers, auto sales and 4G mobile subscriptions all pointed to an expanding new economy in China last year, and the contribution of real tertiary output to China s economic growth has increased to close to 60% in the first nine months of As the government pushes ahead with the necessary reforms, the old economy sectors will continue to drag on China s growth, and this is perhaps the price to pay for a more sustainable economy in the long term. Market Outlook Looking forward, the year 2016 is looking like another volatile year, knowing the markets under coverage really well and accuracy in stock-picking are going to be critical. The global stockmarkets are still full of headwinds and valuation traps abound, this is where active asset management comes into play. By proactively identifying China s new growth engines, the portfolio manager will be placing special focus on six key investment themes Chinese insurance stocks, highdividend stocks, Chinese policy stocks, Chinese pharmaceutical stocks, valuation discrepancies among A-, B- and H-shares and Chinese consumption stocks. On the policy front, the portfolio manager believes stimulus spending will continue to support the Chinese economy going forward monetary policy is expected to stay accommodative in 2016 and the central government is anticipated to step up fiscal effort to stabilise the economy. Annual Review 2015 Manulife Investment-Linked Funds 29

32 market commentary MANULIFE CHINA VALUE FUND (continued) foreign funds Market Outlook (continued) While the room for further rate cuts comes down, most monetary easing in 2016 may come from RRR cuts. It will be a policy priority to maintain the momentum of government spending, and the unofficial fiscal deficit can also increase given restrictions on bond issues by local government financing vehicles have been lifted and official local government bond issues are rising. The portfolio manager sees relatively attractive opportunities in offshore China-related equities, as the valuations of Chinese stocks in offshore markets, e.g. H-shares in Hong Kong, have returned to a very compelling level. It is worthy to note that these stocks listed in an international free market dominated by institutional and professional investors are at a 40% discount to the policy-driven A-share market. As a consequence of the negative repercussions of reforms and the fragilities in the Chinese economy, the portfolio manager sees an increasing number of attractively-valued opportunities in the market. Given the challenging economic outlook in 2016, the portfolio manager will remain nimble and adhere to the belief that bottom-up value stock picking in a growth scarcity environment will be critical for market outperformance. TOP 5 HOLDINGS As at 31 st December 2015 Wgt% Chongqing Changan Automobile 6.0% Taiwan Semiconductor Manufacturing 5.0% China Vanke 4.2% Tencent Holdings 4.2% New China Life Insurance 3.4% Annual Review 2015 Manulife Investment-Linked Funds 30

33 market commentary MANULIFE CHINA VALUE FUND (continued) foreign funds ASSET ALLOCATION As at 31 st December 2015 Sector Exposure Insurance % Others % Other Financials % Telecommunications % Health Care % Liquidity % Oil & Gas % Utilities % Industrials % Technology % Real Estate Investment & Services % Banks % Consumer Goods % Geographic Exposure Others % H Shares % Hong Kong % Cash % China B Shares % Taiwan % Red Chips % Management Fee Fund management fee of 1.50% is charged to the Fund during the year. It is calculated on a daily basis based on the net asset value of the Fund. Manulife China Value Fund is a feeder fund which feeds into the Manulife Global Fund - China Value Fund A Share (MGF-CVFA). The investment reviews are on MGF-CVFA. Manulife China Value Fund is managed by Manulife Asset Management Services Berhad while MGF-CVFA is managed by Value Partners Limited. This report is prepared for information purposes only. Annual Review 2015 Manulife Investment-Linked Funds 31

34 market commentary Manulife Asian Small Cap Growth Fund foreign funds FUND OBJECTIVE Manulife Asian Small Cap Growth Fund (MASCGF) aims to achieve long term capital growth for investors who hold a long term investment view and are prepared to accept significant fluctuations in the value of their investments. MASCGF is a feeder fund and invests at least 95% of its Net Asset Value in Manulife Global Fund Asian Small Cap Equity Fund (MGF ASCEF). MGF ASCEF investment portfolio will be made on a diversified basis, for which its underlying securities will consist mainly of equity related investments and equities of smaller capitalisation companies in the Asian and/or Pacific region. Portfolio Review The sub-fund underperformed its benchmark over the period, primarily due to an overweight position in Hong Kong and China which was reduced late in the year. The sub-fund s less liquid financial and utility holdings in these markets were particularly hard hit during the pronounced market sell-off in the summer. Additionally, the sub-fund s two largest holdings, a Chinese energy measurement solutions company and one of the world largest electronic fund transfer point-of-sale ( POS ) distributors underperformed. Both stocks have been strong outperformers in the previous two years and we see no change in the underlying positive fundamentals of either. Positive contributions to the sub-fund came from very strong stock selection in Taiwan and Australia, and in Malaysia and South Korea. In both Taiwan and Malaysia, strong positive absolute returns were achieved despite large declines in each market s benchmark holdings. Stock selection in India was a detractor, largely due to one position in that market. The top performers over the period were all companies listed in South Korea. A lesser known manufacturer of branded kitchen furniture re-rated on the back of strong earnings growth due to an upturn in the domestic housing marketing and the growing preference for brand furniture amongst domestic consumers. Another strong positive contributor was a leading South Korean digital media representative company specialising in new media platforms as demand for its mobile ads and new ads platform accelerated. A South Korean biosimilar healthcare holding which sells a lower priced alternative to drug to combat Crohn s disease, inflammatory bowel syndrome as well as other autoimmune diseases also performed well. We like the company s first mover advantage in this segment of the biosimilar market. The stock climbed on the back of strong sales in South Korea, Japan, pan-europe and likely entry into the US market in early We see huge potential in the US as the government contends with rising healthcare costs from high-priced patented drugs. The main detractor for the sub-fund was a leading Indian film originator and distributor which declined in response to a speculative media report questioning the sales revenues of its US-listed parent company from its overseas operations and other metrics of that company. After thoroughly reviewing these accusations, we are comfortable holding onto the stock as we believe the selloff of the Indian subsidiary is unwarranted and that the stock has been oversold. Our small energy exposure, which included an Australian-listed unconventional gas holding, which we feel has the potential to benefit from consolidation in the sector, underperformed. Annual Review 2015 Manulife Investment-Linked Funds 32

35 market commentary foreign funds Manulife Asian Small Cap Growth Fund (continued) Portfolio Review (continued) At year end, our largest overweights were in information technology and consumer discretionary, which have been the main overweights for the sub-fund for the past six years. Both sectors are expected to outperform in an environment of gradually rising US interest rates. We continue to be underweight financials and materials. Country wise we are overweight in South Korea, Taiwan and Malaysia, while being underweight in Australia and Singapore. Market Review Asian small cap equity markets posted low single digit losses over the period as a global selloff and concerns over Chinese and global economic growth as well as rising interest rates in the United States negatively impacted investor sentiment. The declining prices of oil and other commodities added to the weakness. All Asian currencies with the exception of the Hong Kong dollar weakened as the US dollar continued to strengthen. In the US, first quarter GDP contracted 0.2% year-on-year before rising 1.5% in the third quarter. The Federal Reserve (Fed) decided to not raise interest rates in September, but did make the first increase in nine years in December. In Europe, the European Central Bank disappointed markets by announcing a less-than-expected quantitative easing program in December. Economic data out of the US and Europe pointed to a gradual but improving economic landscape. In Asia, a rally during the first quarter of the year was cut short as overly ambitious analyst earnings estimates were revised down as the year progressed in sympathy with declining exports, slowing economic growth and general deleveraging. Mainland Chinese equities (A-shares) gained over the period despite a substantial sell-off in the summer, as stocks were sold down in response to record margin lending balances and a 3% devaluation of the Chinese yuan. GDP growth slowed from 7% in the first quarter to 6.9% in the third quarter while the official purchasing managers index (PMI) peaked at 50.2 in May before falling to 49.6 in November. The People s Bank of China cut interest rates five times over the period. The sub-fund held no investments in this market, as all of the Chinese holdings are listed in Hong Kong (H-shares) where freely trading markets meant that Hong Kong saw a much sharper sell-off than China during the summer plunge. In South Korea, the small cap Kosdaq market generated robust returns due to ample liquidity and third quarter GDP rising to a five-year high. The Bank of Korea cut its policy rate twice to a record-low of 1.5%. In Taiwan, the market declined as the economy suffered a technical recession in the third quarter, while the central bank cut its benchmark rate twice during the period. Annual Review 2015 Manulife Investment-Linked Funds 33

36 market commentary foreign funds Manulife Asian Small Cap Growth Fund (continued) Market Review (continued) In India, small cap equities advanced as domestic mutual funds witnessed strong inflows and macroeconomic conditions improved, with declining inflation and a reduction in the current account deficit. Indonesia was the region s worst performing market, as investors showed frustration with inconsistency in government initiatives and as earnings did not meet expectations. Third quarter GDP expanded to 4.7% on-year, unchanged from the first quarter reading while inflation cooled and the government unveiled a series of stimulus packages. In Malaysia, the market fell as lower commodity prices and currency depreciation dented risk appetite. GDP expanded at its slowest pace in two years during the third quarter. In Thailand, the market was down over the period while GDP grew 2.9% year-on-year in the third quarter, slightly faster than the 2.8% expansion seen in the second quarter. Inflation declined for the 11th straight month in November. OUTLOOK Earnings have disappointed for the past four years, and analysts are now expecting only mid to single digit earnings growth. We feel there is a likelihood that equity markets and currencies will bottom at some point in the first half of 2016, as governments kick start their economies with fiscal and infrastructure spending. In China, we do expect the slowdown to persist as the country s economy transitions and reduces overcapacity. Our focus will remain on attractively valued companies with strong earnings momentum, irrespective of the macroeconomic environment. We will add selectively to companies in Southeast Asia, while remaining invested in North Asia and India. In Southeast Asia, we are most optimistic on Indonesia, where we see potential for further interest rate cuts and additional infrastructure spending. TOP 5 HOLDINGS As at 31 st December 2015 Wgt% S & T Motiv Co. Ltd. 1.9% Wasion Group Holdings Limited 1.8% PAX Global Technology Limited 1.6% Celltrion Inc. 1.5% InBody Co. Ltd. 1.5% Annual Review 2015 Manulife Investment-Linked Funds 34

37 market commentary foreign funds Manulife Asian Small Cap Growth Fund (continued) ASSET ALLOCATION As at 31 st December 2015 Others - 4.5% Malaysia - 5.0% Hong Kong - 5.1% India - 9.2% Australia % Indonesia - 2.7% Cash - 2.4% China % Taiwan % Korea % Management Fee Fund management fee of 1.50% is charged to the Fund during the year. It is calculated on a daily basis based on the net asset value of the Fund. Manulife Asian Small Cap Growth Fund is a feeder fund which feeds into the Manulife Global Fund - Asian Small Cap Equity Fund (MGF-ASCEF). The investment reviews are on the MGF-ASCEF. Manulife Asian Small Cap Growth Fund is managed by Manulife Asset Management Services Berhad while the MGF-ASCEF is managed by Manulife Asset Management (Hong Kong) Limited. This report is prepared for information purposes only. Annual Review 2015 Manulife Investment-Linked Funds 35

38 fund performance

39 fund performance equity fund local funds FUND PERFORMANCE For the year under review, the fund underperformed the benchmark FBM100 by 3.35%; the fund s net asset value eased 3.31%, while the benchmark was up 0.04%. At year end, equity exposure was at 83.81%. Performance calculated as at 31 st December 2015 Since 1 mth 3 mths 6 mths YTD 15 2 yrs 3 yrs 5 yrs Inception* % % % % % % % % Equity Fund (3.31) (4.45) FBM (2.94) Relative +/(-) (3.35) (1.51) The Fund s performance is calculated on NAV to NAV basis. The value of units may go down as well as up. Past performance is not indicative of future results. The fund performance is strictly the performance of the investment-linked (IL) fund and not to the gross premium/contribution of the IL insurance product. * Inception Date: 10 th July 2000 AVERAGE ANNUAL RETURN AND BENCHMARK 1 year 3 years 5 years % % % Equity Fund (3.31) FBM Relative +/(-) (3.35) Annual Review 2015 Manulife Investment-Linked Funds 37

40 fund performance managed fund local funds FUND PERFORMANCE For the year under review, the fund underperformed the benchmark by 3.74%; the fund s net asset value was down 2.63%, while the benchmark was up 1.11%. At year end, equity exposure was at 64.74% while fixed income exposure stood at 20.43%. Performance calculated as at 31 st December 2015 Since 1 mth 3 mths 6 mths YTD 15 2 yrs 3 yrs 5 yrs Inception* % % % % % % % % Managed Fund (2.63) (1.56) % FBM % 12-month Maybank FD Rate # (0.01) Relative +/(-) (3.74) (1.55) The Fund s performance is calculated on NAV to NAV basis. The value of units may go down as well as up. Past performance is not indicative of future results. The fund performance is strictly the performance of the investment-linked (IL) fund and not to the gross premium/contribution of the IL insurance product. # Effective 30 th December 2015, the benchmark has been changed to 70% FBM % 12-month Maybank FD Rate. * Inception Date: 10 th July 2000 AVERAGE ANNUAL RETURN AND BENCHMARK 1 year 3 years 5 years % % % Managed Fund (2.63) % FBM % 12-month Maybank FD Rate Relative +/(-) (3.74) Annual Review 2015 Manulife Investment-Linked Funds 38

41 fund performance Income fund local funds FUND PERFORMANCE The Fund achieved an overall return for the year of 3.02% with the Net Asset Value per unit increasing from RM as at end-december 2014 to RM as at end-december Overall return since the Fund s inception in February 2002 was 68.25%. Performance calculated as at 31 st December 2015 Since 1 mth 3 mths 6 mths YTD 15 2 yrs 3 yrs 5 yrs Inception* % % % % % % % % Income Fund month Maybank FD Rate # Relative +/(-) (0.67) (0.28) (0.58) (2.68) (3.02) 9.02 Performance calculated on published NAV to NAV basis net of management fees and expenses. The value of units may go down as well as up. Past performance is not indicative of future results. The fund performance is strictly the performance of the investment-linked (IL) fund and not to the gross premium/contribution of the IL insurance product. * Inception Date: 1 st February 2002 AVERAGE ANNUAL RETURN AND BENCHMARK 1 year 3 years 5 years % % % Income Fund month Maybank FD Rate Relative +/(-) (0.28) (0.84) (0.53) Annual Review 2015 Manulife Investment-Linked Funds 39

42 fund performance dana ekuiti dinamik local funds FUND PERFORMANCE For the year under review, the fund outperformed the benchmark FBMS by 2.54%; the fund s net asset value rose 7.25%, while the benchmark was up 4.71%. Good stocks selection contributed to the fund s good performance. At year end, equity exposure was at 86.47%. Performance calculated as at 31 st December 2015 Since 1 mth 3 mths 6 mths YTD 15 2 yrs 3 yrs 5 yrs Inception* % % % % % % % % Dana Ekuiti Dinamik FBM Emas Shariah Relative +/(-) 1.23 (1.40) The Fund s performance is calculated on NAV to NAV basis. The value of units may go down as well as up. Past performance is not indicative of future results. The fund performance is strictly the performance of the investment-linked (IL) fund and not to the gross premium/contribution of the IL insurance product. * Inception Date: 6 th October 2003 AVERAGE ANNUAL RETURN AND BENCHMARK 1 year 3 years 5 years % % % Dana Ekuiti Dinamik FBM Emas Shariah Relative +/(-) Annual Review 2015 Manulife Investment-Linked Funds 40

43 fund performance manulife flexi invest fund local funds FUND PERFORMANCE For the period under review, Manulife Flexi Invest Fund (MFIF) was up by 15.79%, outperforming its benchmark s (50% FBM % 12-month Maybank FD rate) gain of 0.28%. The Fund s outperformance was mainly attributable to its sector and stock selection strategies, particularly in the industrial products, trading & services and IPC sectors. Under its top five holdings, its investment in Pestech and Time DotCom were the key performers. However, some of the returns were slightly negated by the Fund s positions in foreign stocks. Performance calculated as at 31 st December 2015 Since 1 mth 3 mths 6 mths YTD 15 2 yrs 3 yrs Inception* % % % % % % % Manulife Flexi Invest Fund % FBM % 12-month Maybank FD Rate (1.26) Relative +/(-) The Fund s performance is calculated on NAV to NAV basis. The value of units may go down as well as up. Past performance is not indicative of future results. The fund performance is strictly the performance of the investment-linked (IL) fund and not to the gross premium/contribution of the IL insurance product. * Inception Date: 17 th February 2012 AVERAGE ANNUAL RETURN AND BENCHMARK 1 year 3 years % % Manulife Flexi Invest Fund % FBM % 12-month Maybank FD Rate Relative +/(-) Annual Review 2015 Manulife Investment-Linked Funds 41

44 fund performance MANULIFE PROGRESS FUND local funds FUND PERFORMANCE For the period under review, Manulife Progress Fund (MPROG) was up by 21.73%, outperforming its benchmark s (50% FBM Small Cap + 50% FBM 70) gain of 3.43%. The Fund s outperformance was mainly attributable to the performance of its underlying fund s sector and stock selection strategies, particularly in the industrial products, and trading & services sectors. Under its top five holdings, its investment in Pestech, Kawan Food, and SCGM were the key performers. However, some of the returns were slightly negated by the Fund s underweight position in the technology sector. Performance calculated as at 31 st December 2015 Since 1 mth 3 mths 6 mth Inception* % % % % Manulife Progress Fund % FBM Small Cap + 50% FBM Relative +/(-) The Fund s performance is calculated on NAV to NAV basis. The value of units may go down as well as up. Past performance is not indicative of future results. The fund performance is strictly the performance of the investment-linked (IL) fund and not to the gross premium/contribution of the IL insurance product. * Inception Date: 12 th January 2015 AVERAGE ANNUAL RETURN AND BENCHMARK - N/A Annual Review 2015 Manulife Investment-Linked Funds 42

45 fund performance MANULIFE EMERGING EASTERN EUROPE FUND foreign funds FUND PERFORMANCE The Fund s Net Asset Value per unit increased from RM as at December 2014 to RM as at December Total return since the Fund s inception was (35.16%), outperforming its benchmark by 26.52%. Performance calculated as at 31 st December 2015 Since 1 mth 3 mths 6 mths YTD 15 2 yrs 3 yrs 5 yrs Inception* % % % % % % % % Manulife Emerging Eastern Europe Fund (6.31) (5.95) (3.22) 7.13 (22.16) (12.74) (23.10) (35.16) MSCI EM Eastern Europe Index (7.05) (8.70) (9.50) (27.76) (24.83) (35.29) (61.68) Relative +/(-) (5.68) The Fund s performance is calculated on NAV to NAV basis. The value of units may go down as well as up. Past performance is not indicative of future results. The fund performance is strictly the performance of the investment-linked (IL) fund and not to the gross premium/contribution of the IL insurance product. * Inception Date: 12 th November 2007 AVERAGE ANNUAL RETURN AND BENCHMARK 1 year 3 years 5 years % % % Manulife Emerging Eastern Europe Fund 7.13 (4.44) (5.12) MSCI EM Eastern Europe Index (9.08) (8.34) Relative +/(-) (5.68) Annual Review 2015 Manulife Investment-Linked Funds 43

46 fund performance manulife China value fund foreign funds FUND PERFORMANCE The Fund s Net Asset Value per unit increased from RM as at December 2014 to RM as at December Total return since the Fund s inception was 20.98%. Performance calculated as at 31 st December 2015 Since 1 mth 3 mths 6 mths YTD 15 2 yrs 3 yrs 5 yrs Inception* % % % % % % % % Manulife China Value Fund 1.50 (0.61) (6.86) FTSE All World Greater China Index (6.13) Relative +/(-) 1.03 (2.31) (0.73) (0.33) The Fund s performance is calculated on NAV to NAV basis. The value of units may go down as well as up. Past performance is not indicative of future results. The fund performance is strictly the performance of the investment-linked (IL) fund and not to the gross premium/contribution of the IL insurance product. * Inception Date: 12 th November 2007 AVERAGE ANNUAL RETURN AND BENCHMARK 1 year 3 years 5 years % % % Manulife China Value Fund FTSE All World Greater China Index Relative +/(-) (0.05) Annual Review 2015 Manulife Investment-Linked Funds 44

47 fund performance Manulife Asian Small Cap Growth Fund foreign funds FUND PERFORMANCE For the period under review, Manulife Asian Small Cap Growth Fund was down by 0.35%. underperforming its benchmark by 15.20%. Performance calculated as at 31 st December 2015 Since 1 mth 3 mths 6 mth Inception* % % % % Manulife Asian Small Cap Growth Fund (0.57) (0.90) (4.78) (0.35) MSCI AC Asia Pacific Ex Japan Small Cap Relative +/(-) (2.33) (4.80) (6.07) (15.20) The Fund s performance is calculated on NAV to NAV basis. The value of units may go down as well as up. Past performance is not indicative of future results. The fund performance is strictly the performance of the investment-linked (IL) fund and not to the gross premium/contribution of the IL insurance product. * Inception Date: 12 th January 2015 AVERAGE ANNUAL RETURN AND BENCHMARK - N/A Annual Review 2015 Manulife Investment-Linked Funds 45

48 COMPARATIVE PERFORMANCE TABLES

49 COMPARATIVE PERFORMANCE TABLES local funds The table below shows the performance table of the Investment-Linked Funds. equity fund RM RM RM RM RM Net Asset Value ( NAV ) 214,876, ,267, ,753, ,586,305 83,108,886 Number of units in circulation 46,353,443 38,225,326 32,927,146 27,828,549 23,069,416 NAV per unit Highest NAV per unit during the financial year Lowest NAV per unit during the financial year Categories of investments % % % % % - Quoted securities Other liquid assets Quoted equities by sectors Percentage Percentage Percentage Percentage Percentage of NAV of NAV of NAV of NAV of NAV % % % % % Construction Consumer products Corporate action Finance Industrial products Infrastructure project company Plantations Properties Technology Trading/services Annual Review 2015 Manulife Investment-Linked Funds 47

50 local funds COMPARATIVE PERFORMANCE TABLES (continued) managed fund RM RM RM RM RM Net Asset Value ( NAV ) 186,718, ,784, ,201, ,869, ,377,857 Number of units in circulation 45,738,362 43,834,907 42,008,806 39,196,525 35,796,420 NAV per unit Highest NAV per unit during the financial year Lowest NAV per unit during the financial year Categories of investments % % % % % - Quoted securities Unquoted debt securities Other liquid assets Quoted securities by sectors Percentage Percentage Percentage Percentage Percentage of NAV of NAV of NAV of NAV of NAV % % % % % Construction Consumer products Corporate action Finance Industrial products Infrastructure project company Plantations Properties Technology Trading services Unquoted debt securities by sectors Agriculture, forestry and fishing Construction Electricity, gas and water Finance, insurance, real estate and business services Government and other service Manufacturing 1.01 Transport, storage and communications Annual Review 2015 Manulife Investment-Linked Funds 48

51 local funds COMPARATIVE PERFORMANCE TABLES (continued) income fund RM RM RM RM RM Net Asset Value ( NAV ) 24,711,428 22,107,557 21,064,730 19,563,793 16,113,242 Number of units in circulation 15,459,824 14,248,590 13,974,138 13,133,091 11,136,912 NAV per unit Highest NAV per unit during the financial year Lowest NAV per unit during the financial year Categories of investments % % % % % - Unquoted debt securities Other liquid assets Composition of unquoted debt securities Percentage Percentage Percentage Percentage Percentage of NAV of NAV of NAV of NAV of NAV % % % % % Bonds Loans Government Guaranteed Bonds Unit Trust Unquoted debt securities by sectors Agriculture, forestry and fishing Construction Electricity, gas and water Finance, insurance, real estate and business services Government and other services Manufacturing Transport, storage and communications Annual Review 2015 Manulife Investment-Linked Funds 49

52 local funds COMPARATIVE PERFORMANCE TABLES (continued) dana ekuiti dinamik RM RM RM RM RM Net Asset Value ( NAV ) 23,247,654 21,028,796 20,930,440 14,761,879 11,823,677 Number of units in circulation 7,323,534 7,105,065 7,081,223 6,469,269 5,998,681 NAV per unit Highest NAV per unit during the financial year Lowest NAV per unit during the financial year Categories of investments % % % % % - Quoted securities Other liquid assets Quoted securities by sectors Percentage Percentage Percentage Percentage Percentage of NAV of NAV of NAV of NAV of NAV % % % % % Construction Consumer products Corporate action Finance Industrial products Infrastructure project company Plantations Properties Technology Trading services Annual Review 2015 Manulife Investment-Linked Funds 50

53 local funds COMPARATIVE PERFORMANCE TABLES (continued) manulife flexi invest fund RM RM RM RM Net Asset Value ( NAV ) 30,709,375 26,985,474 20,874,505 14,746,589 Number of units in circulation 21,443,820 21,819,344 17,509,359 13,890,226 NAV per unit Highest NAV per unit during the financial year Lowest NAV per unit during the financial year Categories of investments % % % % - Quoted securities Other liquid assets Quoted equities by sectors (within Malaysia) Percentage Percentage Percentage Percentage of NAV of NAV of NAV of NAV % % % % Construction Consumer products Finance Industrial products Infrastructure project company Plantations Properties Technology Trading/services Quoted equities by sectors (outside Malaysia) Consumer goods industry Construction 1.31 Industrial products Plantation Resources Services Annual Review 2015 Manulife Investment-Linked Funds 51

54 local/foreign funds COMPARATIVE PERFORMANCE TABLES (continued) MANULIFE PROGRESS FUND 2015 RM Net Asset Value ( NAV ) 2,764,260 Number of units in circulation 2,270,778 NAV per unit Highest NAV per unit during the financial period Lowest NAV per unit during the financial period manulife emerging eastern europe fund RM RM RM RM RM Net Asset Value ( NAV ) 2,892,595 2,320,742 2,865,554 2,171,480 1,667,859 Number of units in circulation 4,696,092 4,036,044 3,620,894 3,076,079 2,701,668 NAV per unit Highest NAV per unit during the financial year Lowest NAV per unit during the financial year manulife china value fund RM RM RM RM RM Net Asset Value ( NAV ) 13,579,073 11,421,249 9,371,557 6,146,389 4,666,044 Number of units in circulation 11,815,278 11,275,564 10,367,630 7,871,143 6,305,760 NAV per unit Highest NAV per unit during the financial year Lowest NAV per unit during the financial year Annual Review 2015 Manulife Investment-Linked Funds 52

55 foreign funds COMPARATIVE PERFORMANCE TABLES (continued) MANULIFE ASIAN SMALL CAP GROWTH FUND 2015 RM Net Asset Value ( NAV ) 406,569 Number of units in circulation 408,013 NAV per unit Highest NAV per unit during the financial period Lowest NAV per unit during the financial period Capital Growth and Income Distribution Table Capital Growth Income Distribution % % % % % % Equity Fund (3.30) (1.18) Managed Fund (2.65) Income Fund Dana Ekuiti Dinamik Manulife Flexi Invest Fund Manulife Progress Fund Manulife Emerging Eastern Fund 7.13 (27.34) (23.41) Manulife China Value Fund (17.13) Manulife Asian Small Cap Growth Fund Annual Review 2015 Manulife Investment-Linked Funds 53

56 investment information

57 investment information local funds The details of investments of the Investment-Linked Funds are set out as follows: EQUITY FUND Quoted securities PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % Derivatives TRADING SERVICES TALIWORKS CORPORATION BERHAD - WARRANT 117,200-45, BERJAYA FOOD BERHAD - WARRANT 639, , , Equities CONSTRUCTION IJM CORPORATION BHD 1,195,500 3,863,520 4,016, PROTASCO BHD 618,500 1,152, , CONSUMER NESTLE (MALAYSIA) BERHAD 80,400 5,452,041 5,877, FRASER & NEAVE HOLDINGS BHD 380,300 6,880,698 7,043, DUTCH LADY MILK INDUSTRIES BHD 45,600 2,116,208 2,177, FINANCE MALAYAN BANKING BERHAD 1,953,444 17,858,552 16,350, CIMB GROUP HOLDINGS BERHAD 841,549 4,235,521 3,812, AEON CREDIT SERVICE (M) BHD 185,700 2,558,072 2,202, PUBLIC BANK BHD 911,700 17,353,441 16,884, INDUSTRIAL CAHYA MATA SARAWAK BERHAD 1,142,700 4,267,574 5,850, HEVEABOARD BHD 705, ,639 1,135, KOSSAN RUBBER INDUSTRIES BHD 1,134,200 7,557,221 10,321, TOP GLOVE CORPORATION BHD 921,200 6,256,157 12,509, EVERGREEN FIBREBOARD BHD 1,408,100 2,845,201 3,323, SKP RESOURCES BHD 3,497,600 4,506,690 4,581, PETRONAS GAS BHD 347,900 7,621,487 7,897, Annual Review 2015 Manulife Investment-Linked Funds 55

58 investment information (continued) local funds EQUITY FUND (continued) Quoted securities (continued) PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % INFRASTRUCTURE PROJECT COMPANY DIGI.COM BERHAD 1,604,800 8,737,291 8,665, TIME DOTCOM BHD 76, , , PLANTATION KUALA LUMPUR KEPONG BHD 131,200 3,031,553 3,001, IOI CORPORATION BHD 598,200 2,610,864 2,638, GENTING PLANTATIONS BERHAD 188,700 1,905,672 1,996, TECHNOLOGY GLOBETRONICS TECHNOLOGY BHD 891,600 5,390,426 5,786, TRADING SERVICES TALIWORKS CORPORATION BHD 689, ,902 1,006, AXIATA GROUP BERHAD 663,800 4,093,773 4,241, MISC BHD 444,100 4,041,403 4,139, CENTURY LOGISTICS HOLDINGS BHD 1,892,700 1,785,675 1,580, AEON CO. (M) BHD 655,200 1,389,678 1,788, BERJAYA FOOD BERHAD 3,494,900 5,568,725 8,073, TELEKOM MALAYSIA BHD 1,003,613 7,334,656 6,774, TENAGA NASIONAL BHD 1,034,100 13,402,872 13,712, MALAKOFF CORPORATION BERHAD 6,303,200 11,366,417 10,085, TOTAL 35,798, ,095, ,078, Annual Review 2015 Manulife Investment-Linked Funds 56

59 investment information (continued) local funds managed FUND Quoted securities PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % CONSTRUCTION IJM CORPORATION BHD 768,800 2,482,741 2,583, PROTASCO BHD 939,600 1,758,277 1,503, CONSUMER NESTLE (MALAYSIA) BERHAD 58,300 3,855,770 4,261, FRASER & NEAVE HOLDINGS BHD 290,000 5,277,807 5,370, FINANCE CIMB GROUP HOLDINGS BERHAD 100, , , PUBLIC BANK BHD 606,900 11,536,893 11,239, MALAYAN BANKING BERHAD 1,475,187 13,587,953 12,347, AEON CREDIT SERVICE (M) BHD 64, , , BIMB HOLDINGS BERHAD - WARRANT 945, , , INDUSTRIAL KOSSAN RUBBER INDUSTRIES BHD 804,900 5,171,321 7,324, PETRONAS GAS BHD 221,400 4,842,618 5,025, SKP RESOURCES BHD 2,008,000 3,071,127 2,630, EVERGREEN FIBREBOARD BHD 964,800 1,819,048 2,276, TOP GLOVE CORPORATION BHD 582,900 4,180,449 7,915, CAHYA MATA SARAWAK BHD 1,000,700 2,905,405 5,123, INFRASTRUCTURE PROJECT COMPANY DIGI.COM BERHAD 1,037,400 5,581,926 5,601, TIME DOTCOM BHD 164,000 1,013,471 1,246, PLANTATION IOI CORPORATION BERHAD 378,000 1,650,279 1,666, KUALA LUMPUR KEPONG BHD 83,000 1,918,387 1,899, GENTING PLANTATIONS BERHAD 119,400 1,187,970 1,263, Annual Review 2015 Manulife Investment-Linked Funds 57

60 investment information (continued) local funds managed FUND (continued) Quoted securities (continued) PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % TECHNOLOGY GLOBETRONICS TECHNOLOGY BHD 693,400 4,197,709 4,500, TRADING SERVICES AEON CO. (M) BHD 607,100 1,789,140 1,657, AXIATA GROUP BERHAD 204,700 1,267,927 1,308, BERJAYA FOOD BERHAD 2,960,100 4,705,022 6,837, TELEKOM MALAYSIA BHD 820,499 5,963,880 5,538, MISC BHD 281,900 2,565,867 2,627, MALAKOFF CORPORATION BERHAD 3,282,200 5,922,486 5,251, CENTURY LOGISTICS HOLDINGS BHD 1,195,100 1,119, , TENAGA NASIONAL BHD 776,500 9,981,432 10,296, TALIWORKS CORPORATION BHD 441, , , TALIWORKS CORPORATION BHD - WARRANT 88,200-33, BERJAYA FOOD - WARRANT 229, , , TOTAL 24,194, ,271, ,877, Annual Review 2015 Manulife Investment-Linked Funds 58

61 investment information (continued) local funds managed FUND (continued) Unquoted debt securities PERCENTAGE of NET NOMINAL NET BOOK MARKET ASSET VALUE VALUE VALUE VALUE RM RM RM % BANK MUAMALAT MALAYSIA BERHAD 5.15% 15/06/2021 3,000,000 3,017,859 3,015, BERJAYA LAND BERHAD 4.850% 16/12/2019 2,500,000 2,513,492 2,531, BUMITAMA AGRI LTD 5.25% 18/03/2019 5,000,000 5,059,882 5,085, GOVERNMENT OF MALAYSIA 3.759% 15/03/2019 5,000,000 5,017,456 5,074, HONG LEONG BANK BERHAD 4.50% 21/06/2024 4,000,000 4,000,000 3,959, IMPIAN EKSPRESI SDN BHD 4.75% 27/11/2020 3,500,000 3,515,663 3,507, MANJUNG ISLAND ENERGY BERHAD 4.58% 25/11/2027 2,000,000 2,034,099 1,965, N.U.R POWER SDN BHD 4.43% 25/06/2021 4,000,000 3,990,707 3,984, SABAH DEVELOPMENT BANK 4.45% 10/02/2016 3,000,000 3,000,000 3,001, SPORTS TOTO MALAYSIA SDN BHD 4.8% 11/10/2016 4,000,000 4,006,361 4,015, TELEKOM MALAYSIA BERHAD 4.50% 25/06/2021 2,000,000 2,009,657 2,002, TOTAL 38,000,000 38,165,176 38,143, Annual Review 2015 Manulife Investment-Linked Funds 59

62 investment information (continued) local funds income FUND Unquoted debt securities PERCENTAGE of NET NOMINAL NET BOOK MARKET ASSET VALUE VALUE VALUE VALUE RM RM RM % ALLIANCE BANK MALAYSIA BERHAD 5.75% 27/10/2025 1,000,000 1,000,000 1,010, ANIH BERHAD 4.80% 29/11/2018 1,000,000 1,017,000 1,010, AQUASAR CAPITAL SDN BHD 4.62% 16/07/2021 1,000,000 1,020,900 1,011, SARAWAK ENERGY BERHAD 4.75% 18/08/ , , , SARAWAK ENERGY BERHAD 5.00% 04/07/ , , , YTL CORPORATION BERHAD 4.38% 25/04/2023 1,000,000 1,002, , YTL POWER INTERNATIONAL BERHAD 4.49% 24/03/2019 1,000, , , KRUNG THAI BANK PUBLIC COMPANY LIMITED, CAYMAN ISLANDS BRANCH 5.10% 04/07/2055 2,200,000 2,200,000 2,202, GB SERVICES BERHAD 5.30% 110/8/2019 1,000,000 1,069,100 1,030, BENIH RESTU BERHAD 4.62% 05/06/2025 1,000,000 1,001, , AMBANK (M) BERHAD 4.45% 14/10/2022 1,000, , , JIMAH ENERGY VENTURES 8.65% 11/10/2017 1,100,000 1,354,210 1,181, KUALA LUMPUR KEPONG 4.00% 02/09/ , , , BGSM MANAGEMENT SDN BHD 7.10% 28/12/ , , , BGSM MANAGEMENT SDN BHD 4.22% 25/11/2022 1,000,000 1,032,300 1,011, MANJUNG ISLAND ENERGY BERHAD 4.22% 25/11/2022 1,000,000 1,022, , PRASARANA MALAYSIA BERHAD 4.58% 03/08/ , , , Annual Review 2015 Manulife Investment-Linked Funds 60

63 investment information (continued) local funds income FUND (continued) Unquoted debt securities (continued) PERCENTAGE of NET NOMINAL NET BOOK MARKET ASSET VALUE VALUE VALUE VALUE RM RM RM % PUBLIC BANK BERHAD 4.28% 03/08/2022 1,000,000 1,007, , BANK PEMBANGUNAN MALAYSIA BHD 5.70% 25/04/2016 1,000,000 1,004,550 1,005, COUNTRY GARDEN REAL ESTATE SDN BHD 6.00% 29/12/ , , , UEM SUNRISE BERHAD 4.25% 21/12/2017 1,000, , , UEM SUNRISE BERHAD 4.9% 30/06/2021 1,000,000 1,000,000 1,000, MALAYSIA GOVERNMENT 3.99% 15/10/ , , , MALAYSIA GOVERNMENT 3.73% 22/03/2023 1,000, , , TOTAL 22,100,000 22,593,590 22,147, Annual Review 2015 Manulife Investment-Linked Funds 61

64 investment information (continued) local funds dana ekuiti dinamik Quoted securities PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % CONSTRUCTION IJM CORPORATION BHD 71, , , PROTASCO BHD 143, , , CONSUMER FRASER & NEAVE HOLDINGS BHD 62,600 1,106,378 1,159, NESTLE (MALAYSIA) BERHAD 15,600 1,047,567 1,140, HUP SENG INDUSTRIES BHD 87, , , FINANCE BIMB HOLDINGS BERHAD 51, , , BIMB HOLDINGS BERHAD - WARRANT 323, , , INDUSTRIAL CAHYA MATA SARAWAK BERHAD 98, , , SUCCESS TRANSFORMER CORPORATION BERHAD 173, , , EVERGREEN FIBREBOARD BHD 171, , , SKP RESOURCES BHD 319, , , PETRONAS CHEMICALS GROUP BHD 130, , , PETRONAS GAS BHD 39, , , KOSSAN RUBBER INDUSTRIES BHD 119, ,138 1,086, TOP GLOVE CORPORATION BHD 90, ,617 1,224, INFRASTRUCTURE PROJECT COMPANY DIGI.COM BERHAD 281,100 1,505,441 1,517, PLANTATION KUALA LUMPUR KEPONG BHD 19, , , IOI CORPORATION BHD 81, , , GENTING PLANTATIONS BERHAD 31, , , PROPERTIES UOA DEVELOPMENT BERHAD 469, , , TECHNOLOGY GLOBETRONICS TECHNOLOGY BHD 86, , , Annual Review 2015 Manulife Investment-Linked Funds 62

65 investment information (continued) local funds dana ekuiti dinamik (continued) Quoted securities (continued) PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % TRADING SERVICES UEM EDGENTA BERHAD 94, , , MALAKOFF CORPORATION BERHAD 898,800 1,469,569 1,438, TELEKOM MALAYSIA BHD 125, , , TALIWORKS CORPORATION BHD 464, , , MISC BHD 49, , , CENTURY LOGISTICS HOLDINGS BHD 140, , , TENAGA NASIONAL BHD 151,600 1,847,167 2,010, AEON CO. (M) BHD 41, , , STAR MEDIA GROUP BERHAD 92, , , MAXIS BERHAD 96, , , TALIWORKS CORPORATION BERHAD - WARRANT 92,950-35, TOTAL 5,118,116 18,199,399 20,102, Annual Review 2015 Manulife Investment-Linked Funds 63

66 investment information (continued) local funds manulife flexi invest FUND Quoted securities (within Malaysia) PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % CONSTRUCTION IJM CORPORATION BHD 87, , , MUHIBBAH ENGINEERING (M) BHD 110, , , CONSUMER KAREX BERHAD 248, ,819 1,014, CARLSBERG BREWERY MALAYSIA BHD 14, , , PADINI HOLDINGS BHD 381, , , PROLEXUS BHD 178, , , SIGNATURE INTERNATIONAL BHD 161, , , FINANCE RHB CAPITAL BHD 70, , , CIMB GROUP HOLDINGS BERHAD 87, , , HONG LEONG BANK BERHAD 33, , , HONG LEONG FINANCIAL GROUP BERHAD 20, , , MALAYAN BANKING BHD 35, , , TUNE PROTECT GROUP BERHAD 274, , , INDUSTRIAL PRODUCTS UCHI TECHNOLOGIES BHD 152, , , MUDA HOLDINGS BERHAD 361, , , SLP RESOURCES BHD 191, , , SCGM BHD 196, , , HUME INDUSTRIES BERHAD 72, , , UNITED U-LI CORPORATION BHD 116, , , CAHYA MATA SARAWAK BHD 139, , , TA ANN HOLDINGS BHD 58, , , P.I.E. INDUSTRIAL BERHAD 49, , , INFRASTRUCTURE PROJECT COMPANY TIME DOTCOM BERHAD 126, , , PLANTATION IJM PLANTATIONS BERHAD 81, , , KUALA LUMPUR KEPONG BHD 18, , , GENTING PLANTATIONS BERHAD 43, , , Annual Review 2015 Manulife Investment-Linked Funds 64

67 investment information (continued) local funds manulife flexi invest FUND (continued) Quoted securities (within Malaysia) (continued) PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % PROPERTIES S P SETIA BERHAD 64, , , SUNWAY BERHAD 86, , , ECO WORLD DEVELOPMENT GROUP BERHAD 103, , , TECHNOLOGY INARI AMERTRON BERHAD 81, , , TRADING SERVICES MY E.G. SERVICES BHD 142, , , PETRONAS DAGANGAN BHD 31, , , GENTING BERHAD 139,900 1,036,694 1,021, TENAGA NASIONAL BHD 52, , , TELEKOM MALAYSIA BERHAD 112, , , AXIATA GROUP BERHAD 48, , , DKSH HOLDINGS (M) BHD 39, , , AEON CO. (M) BHD 114, , , KPJ HEALTHCARE BERHAD 104, , , HARBOUR-LINK FROUP BHD 221, , , MALAKOFF CORPORATION BERHAD 177, , , UZMA BHD 140, , , IHH HEALTHCARE BERHAD 137, , , WESTPORTS HOLDINGS BERHAD 87, , , PESTECH INTERNATIONAL BERHAD 229, ,143 1,536, MISC BHD 96, , , ASTRO MALAYSIA HOLDINGS BERHAD 52, , , ENGTEX GROUP BHD 475, , , TOTAL 6,053,244 20,344,796 23,559, Annual Review 2015 Manulife Investment-Linked Funds 65

68 investment information (continued) local funds manulife flexi invest FUND (continued) Quoted securities (outside Malaysia) PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % FOREIGN INVESTMENT CONSUMER GOODS INDUSTRY FIH MOBILE LTD 124, , , PT ULTRAJAYA MILK INDUSTRY & TRADING CO Tbk 363, , , UNI-CHARM CORPORATION 3, , , KOREA ELECTRIC POWER CORPORATION 1, , , INDUSTRIAL PRODUCTS WILMAR INTERNATIONAL LTD 43, , , CNOOC LTD COMPANY 59, , , TEXWINCA HOLDINGS LIMITED 70, , , PLANTATION FIRST RESOURCES LTD 149, , , RESOURCES BANGKOK AVIATION FUEL SERVICES PLC 129, , , PT PERUSAHAAN GAS NEGARA TBK 485, , , SANDS CHINA LTD 18, , , SERVICES TENCENT HOLDINGS LTD 5, , , KERRY LOGISTICS NETWORK LTD 24, , , TOTAL 1,478,299 4,854,868 4,889, Annual Review 2015 Manulife Investment-Linked Funds 66

69 investment information (continued) local/foreign funds MANULIFE PROGRESS FUND PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % MANULIFE INVESTMENT PROGRESS FUND ( MIPF ) 5,976,152 2,447,109 2,674, MANULIFE EMERGING EASTERN EUROPE FUND PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % MGF EEEF-CLASS A 228,724 3,354,096 2,740, MANULIFE CHINA VALUE FUND PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % MGF CVF-CLASS A 377,905 8,596,719 12,979, MANULIFE ASIAN SMALL CAP GROWTH FUND PERCENTAGE of NET AGGREGATE MARKET ASSET QUANTITY COST VALUE VALUE RM RM % MGF-ASCEF 67, , , Annual Review 2015 Manulife Investment-Linked Funds 67

70 Summary of Financial Statement

71 summary of financial statement STATEMENT OF INCOME AND EXPENDITURE FOR THE FINANCIAL YEAR/PERIOD ENDED 31 DECEMBER 2015 local funds 12 January to 31 December 2015 Manulife dana Flexi Manulife Equity Managed Ekuiti Income Invest Progress Fund Fund Dinamik Fund Fund Fund 2015 rm RM RM RM RM RM INCOME Net Investment Income Interest income 1,029,368 2,460,773 1,046,472 93, Profit sharing income 99,858 Dividend income 4,553,473 3,196, ,312 7, ,773 78,169 Rebate income 14,498 Profits on disposal of investments 82, , ,538 Realised exchange gains 349,743 Unrealised exchange gains 557,199 Unrealised capital gains 5,269,239 2,329, ,164 3,020, ,219 Deferred Tax 589, ,833 Total income 11,441,550 8,530,079 2,003,958 1,053,484 5,275, ,978 OUTGO Management expenses 2,871,933 2,463, , , ,632 15,468 Amortisation of premiums 46,072 8,658 Loss on disposal of investments 14,043,391 10,816,078 9,324 Unrealised capital losses 93,774 Taxation 116,215 80, ,241 20,776 Total outgo 16,915,324 13,325, , ,796 1,061,873 36,244 Excess of (outgo over income)/income over outgo (5,473,774) (4,795,533) 1,553, ,688 4,213, ,734 Undistributed income brought forward 66,401,205 76,946,571 11,961,401 5,020,471 3,189,352 Undistributed income carried forward 60,927,431 72,151,038 13,514,989 5,696,159 7,402, ,734 Annual Review 2015 Manulife Investment-Linked Funds 69

72 summary of financial statement foreign funds STATEMENT OF INCOME AND EXPENDITURE FOR THE FINANCIALYEAR/PERIOD ENDED 31 DECEMBER 2015 (continued) 12 January to 31 December 2015 Manulife Manulife Manulife Emerging Asian china Eastern Small Cap value Europe Growth Fund Fund Fund 2015 rm RM RM INCOME Net Investment Income Interest income 2, Profit sharing income Dividend income 97,028 66,888 6,911 Rebate income 92,005 18,885 1,567 Profits on disposal of investments Realised exchange gains 102,948 5,056 7,766 Unrealised exchange gains 2,923,738 1,126,554 54,248 Unrealised capital gains Deferred Tax 885 Total income 3,218,451 1,217,666 71,421 OUTGO Management expenses 147,171 42,040 2,630 Amortisation of premiums Loss on disposal of investments 273,141 9,346 Unrealised capital losses 1,058, ,193 75,395 Taxation 212,130 40,730 Total outgo 1,690,533 1,059,963 87,371 Excess of income over outgo/(outgo over income) 1,527, ,703 (15,950) Undistributed income/(loss) brought forward 2,411,145 (677,481) Undistributed income/(losses) carried forward 3,939,063 (519,778) (15,950) Annual Review 2015 Manulife Investment-Linked Funds 70

73 summary of financial statement local funds STATEMENT OF INCOME AND EXPENDITURE FOR THE FINANCIALYEAR/PERIOD ENDED 31 DECEMBER 2015 (continued) Manulife dana Flexi Equity Managed Ekuiti Income Invest Fund Fund Dinamik Fund Fund 2014 rm RM RM RM RM INCOME Net Investment Income Interest income 1,112,359 2,466, ,214 84,464 Profit sharing income 96,623 Dividend income 3,196,042 2,937, ,466 42, ,025 Rebate income Other income 1, Profits on disposal of investments 10,616,116 12,276,007 2,159,646 3,647 2,240,806 Realised exchange gains Unrealised exchange gains Unrealised capital gains 1,411 Deferred Tax 319,308 5,688 Total income 15,245,100 17,680,301 2,681, ,946 2,835,295 OUTGO Management expenses 2,669,011 2,507, , , ,734 Amortisation of premiums 7,688 96,271 Loss on disposal of investments 112,310 6,899 Unrealised capital losses 15,719,829 13,190,893 2,326,673 1,770,557 Taxation 117,123 70,374 38,630 Total outgo 18,388,840 15,935,881 2,655, ,909 2,454,820 Excess of (outgo over income)/income over outgo (3,143,740) 1,744,420 25, , ,475 Undistributed income brought forward 69,544,945 75,202,151 11,935,614 4,385,434 2,808,877 Undistributed income carried forward 66,401,205 76,946,571 11,961,401 5,020,471 3,189,352 Annual Review 2015 Manulife Investment-Linked Funds 71

74 summary of financial statement foreign funds STATEMENT OF INCOME AND EXPENDITURE FOR THE FINANCIALYEAR/PERIOD ENDED 31 DECEMBER 2015 (continued) Manulife Manulife Emerging china Eastern value Europe Fund Fund 2014 rm RM INCOME Net Investment Income Interest income Profit sharing income Dividend income 73,214 18,428 Rebate income 95,659 26,466 Other income Profits on disposal of investments Realised exchange gains Unrealised exchange gains 643, ,031 Unrealised capital gains 734,779 Deferred Tax 50,786 Total income 1,547, ,009 OUTGO Management expenses 104,646 32,656 Amortisation of premiums Loss on disposal of investments Unrealised capital losses 1,137,244 Taxation 180,752 Total outgo 285,398 1,169,900 Excess of income over outgo/ (outgo over income) 1,262,276 (843,891) Undistributed income brought forward 1,148, ,410 Undistributed income/(loss) carried forward 2,411,145 (677,481) Annual Review 2015 Manulife Investment-Linked Funds 72

75 summary of financial statement STATEMENT OF ASSETS AND LIABILITIES AS AT 31 DECEMBER 2015 local funds Manulife dana Flexi Manulife Equity Managed Ekuiti Income Invest Progress Fund Fund Dinamik Fund Fund Fund 2015 rm RM RM RM RM RM ASSETS Investments Quoted securities 180,078, ,877,294 20,102,978 23,559,157 2,674,328 Unquoted debt securities 38,143,810 22,147,721 Investment in foreign assets 4,889,879 Fixed deposits 32,630,000 27,479,999 3,219,999 1,758,210 1,349,984 Other receivables 2,838, , , ,630 1,255, ,664 Cash and bank balances 51,940 52,122 63,993 27, ,900 7,313 Current tax assets 1,041, ,151 Deferred tax assets 23,895 Total assets 216,640, ,049,587 23,530,887 24,814,333 31,537,927 2,788,305 LIABILITIES Payables 775, ,275 88,745 20, ,349 3,269 Current tax liabilities 40,253 82,764 83,253 3,602 Deferred tax liabilities 988, , , ,950 17,174 Total liabilities 1,764,049 1,331, , , ,552 24,045 NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS 214,876, ,718,239 23,247,654 24,711,428 30,709,375 2,764,260 REPRESENTED BY: Policyholders capital 153,948, ,567,201 9,732,665 19,015,269 23,306,700 2,480,526 Undistributed income carried forward 60,927,431 72,151,038 13,514,989 5,696,159 7,402, ,734 NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS 214,876, ,718,239 23,247,654 24,711,428 30,709,375 2,764,260 NUMBER OF UNITS IN CIRCULATION 46,353,443 45,738,362 7,323,534 15,459,824 21,443,820 2,270,778 NET ASSET VALUE ATTRIBUTABLE TO POLICYHOLDERS PER UNIT Annual Review 2015 Manulife Investment-Linked Funds 73

76 summary of financial statement STATEMENT OF ASSETS AND LIABILITIES AS AT 31 DECEMBER 2015 (continued) foreign funds Manulife Manulife Manulife Emerging Asian china Eastern Small Cap value Europe Growth Fund Fund Fund 2015 rm RM RM ASSETS Investments Quoted securities Unquoted debt securities Investment in foreign assets 12,979,372 2,740, ,495 Fixed deposits Other receivables 18,630 10, Cash and bank balances 996, ,321 13,862 Current tax assets Deferred tax assets 49,672 1,704 Total assets 13,994,673 2,925, ,326 LIABILITIES Payables 53,831 22,266 23,937 Current tax liabilities 17,252 10, Deferred tax liabilities 344,517 Total liabilities 415,600 32,744 24,757 NET ASSETS ATTRIBUTABLE TO POLICYHOLDErs 13,579,073 2,892, ,569 REPRESENTED BY: Policyholders capital 9,640,010 3,412, ,519 Undistributed income/ (losses) carried forward 3,939,063 (519,778) (15,950) NET ASSETS ATTRIBUTABLE TO POLICYHOLDErs 13,579,073 2,892, ,569 NUMBER OF UNITS IN CIRCULATION 11,815,278 4,696, ,013 NET ASSET VALUE ATTRIBUTABLE TO POLICYHOLDERS PER UNIT Annual Review 2015 Manulife Investment-Linked Funds 74

77 summary of financial statement STATEMENT OF ASSETS AND LIABILITIES AS AT 31 DECEMBER 2015 (continued) local funds Manulife dana Flexi Equity Managed Ekuiti Income Invest Fund Fund Dinamik Fund Fund 2014 rm RM RM RM RM ASSETS Investments Quoted securities 108,323, ,202,471 17,183,275 18,978,630 Unquoted debt securities 40,166,862 21,833,117 Investment in foreign assets 4,153,375 Fixed deposits 76,998,000 33,396,000 4,075,000 2,955,055 Other receivables 2,671,448 2,361, , ,877 1,683,866 Cash and bank balances 20,159 20,184 20, , ,625 Deferred tax assets 15,348 22,726 Total assets 188,013, ,147,250 21,452,448 22,264,367 28,652,277 LIABILITIES Payables 3,270,211 3,692, ,878 88,591 1,493,588 Current tax liabilities 938,278 1,169, ,501 68, ,215 Deferred tax liabilities 537, ,586 78,273 Total liabilities 4,745,556 5,363, , ,810 1,666,803 NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS 183,267, ,784,015 21,028,796 22,107,557 26,985,474 REPRESENTED BY: Policyholders capital 116,866, ,837,444 9,067,395 17,087,086 23,796,122 Undistributed income carried forward 66,401,205 76,946,571 11,961,401 5,020,471 3,189,352 NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS 183,267, ,784,015 21,028,796 22,107,557 26,985,474 NUMBER OF UNITS IN CIRCULATION 38,225,326 43,834,907 7,105,065 14,248,590 21,819,344 NET ASSET VALUE ATTRIBUTABLE TO POLICYHOLDERS PER UNIT Annual Review 2015 Manulife Investment-Linked Funds 75

78 summary of financial statement STATEMENT OF ASSETS AND LIABILITIES AS AT 31 DECEMBER 2015 (continued) foreign funds Manulife Manulife Emerging china Eastern value Europe Fund Fund 2014 rm RM ASSETS Investments Quoted securities Unquoted debt securities Investment in foreign assets 11,058,059 2,225,904 Fixed deposits Other receivables 77,067 26,588 Cash and bank balances 530,970 21,215 Current tax assets 61,522 Total assets 11,666,096 2,335,229 LIABILITIES Payables 13,914 6,372 Current tax liabilities 29,800 8,115 Deferred tax liabilities 201,133 Total liabilities 244,847 14,487 NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS 11,421,249 2,320,742 REPRESENTED BY: Policyholders capital 9,010,104 2,998,223 Undistributed income/(loss) carried forward 2,411,145 (677,481) NET ASSETS ATTRIBUTABLE TO POLICYHOLDERS 11,421,249 2,320,742 NUMBER OF UNITS IN CIRCULATION 11,275,564 4,036,044 NET ASSET VALUE ATTRIBUTABLE TO POLICYHOLDERS PER UNIT Annual Review 2015 Manulife Investment-Linked Funds 76

79 summary of financial statement STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL YEAR/period ENDED 31 DECEMBER 2015 local funds 12 January to 31 December 2015 Manulife dana Flexi Manulife Equity Managed Ekuiti Income Invest Progress Fund Fund Dinamik Fund Fund Fund 2015 rm RM RM RM RM RM Net asset value at the beginning of the financial year/period 183,267, ,784,015 21,028,796 22,107,557 26,985,474 Net realised (losses)/ income after taxation (10,743,013) (7,124,905) 628, , ,831 56,515 Net unrealised capital gains/(losses) on investments 5,269,239 2,329, ,164 (93,774) 3,577, ,219 Amounts received from net creation of units 86,920,368 40,460,024 4,878,685 5,997,225 15,580,780 3,447,128 Amounts paid for net cancellation of units (49,838,314) (32,730,267) (4,213,415) (4,069,042) (16,070,202) (966,602) Net asset value at the end of the financial year/period 214,876, ,718,239 23,247,654 24,711,428 30,709,375 2,764, Net asset value at the beginning of the financial year 159,753, ,201,605 20,930,440 21,064,730 20,874,505 Net realised income after taxation 12,576,089 14,935,313 2,352, ,626 2,151,032 Net unrealised capital (losses)/gains on investments (15,719,829) (13,190,893) (2,326,673) 1,411 (1,770,557) Amounts received from net creation of units 68,667,770 39,777,593 4,170,471 4,154,069 14,606,129 Amounts paid for net cancellation of units (42,009,825) (31,939,603) (4,097,902) (3,746,279) (8,875,635) Net asset value at the end of the financial year 183,267, ,784,015 21,028,796 22,107,557 26,985,474 Annual Review 2015 Manulife Investment-Linked Funds 77

80 summary of financial statement foreign funds STATEMENT OF CHANGES IN NET ASSET VALUE FOR THE FINANCIAL YEAR/period ENDED 31 DECEMBER 2015 (continued) 12 January to 31 December 2015 Manulife Manulife Manulife Emerging Asian china Eastern Small Cap value Europe Growth Fund Fund Fund 2015 rm RM RM Net asset value at the beginning of the financial year/period 11,421,249 2,320,742 Net realised (losses)/income after taxation (337,729) 8,342 5,197 Net unrealised capital gains/(losses) on investments 1,865, ,361 (21,147) Amounts received from net creation of units 3,358,156 1,083, ,096 Amounts paid for net cancellation of units (2,728,250) (669,132) (212,577) Net asset value at the end of the financial year/period 13,579,073 2,892, , Net asset value at the beginning of the financial year 9,371,557 2,865,554 Net realised (loss)/income after taxation (116,179) 63,322 Net unrealised capital gains/(losses) on investments 1,378,455 (907,213) Amounts received from net creation of units 2,941, ,431 Amounts paid for net cancellation of units (2,154,362) (663,352) Net asset value at the end of the financial year 11,421,249 2,320,742 Annual Review 2015 Manulife Investment-Linked Funds 78

81 Notes To The Financial Information

82 NOTES TO THE FINANCIAL INFORMATION 31 DECEMBER PRINCIPAL ACTIVITIES The principal activities of the Investment-Linked Funds of Manulife Insurance Berhad consisting of Equity Fund, Managed Fund, Dana Ekuiti Dinamik, Income Fund, Manulife Flexi Invest Fund, Manulife China Value Fund, Manulife Emerging Eastern Europe Fund, Manulife Asian Small Cap Growth Fund and Manulife Progress Fund (herein referred to collectively as the Investment-Linked Funds ) are to invest in authorised investments. The objective of the Equity Fund and Managed Fund are to invest in authorised investments listed on the Bursa Malaysia Securities Berhad ( Bursa Malaysia ) which seeks to maximise medium to long-term capital appreciation. The objective of the Dana Ekuiti Dinamik seeks to maximise medium to long term capital appreciation by investing in Shariah compliant equity and equity-related securities listed on the Bursa Malaysia. The objective of the Income Fund seeks to provide a steady return to policyholders through accumulation of capital over the long term. The objective of the Manulife Flexi Invest Fund is to provide a platform for investors who seek supervised capital appreciation at medium to high level of risk over a mid-to long term investment horizon. Investors have the opportunity to benefit from equity returns during a market upturn and earn steady return from fixed income during times of market uncertainties. The Manulife Flexi Invest Fund may invest between 0 to 100% of the fund s net asset value in equities and equity related instruments and/or fixed income securities (including but not limited to money market instruments and other liquid assets). The Investment-Linked Fund is also allowed to invest up to 30% of the fund s net asset value in foreign markets as and when opportunities arise. The objective of the Manulife China Value Fund aims to achieve long-term capital growth through investment, primarily in companies with substantial business interests in the Greater China Region (which includes People s Republic of China, Hong Kong and Taiwan) which are listed on stock exchanges of Shanghai, Shenzhen, Hong Kong, Taipei or other exchanges. The objective of the Manulife Emerging Eastern Europe Fund aims to achieve capital growth through investment primarily in securities which are listed or traded on the stock exchanges of Central and Eastern European countries. It is intended that the Fund will concentrate (although not necessarily exclusively) on securities listed or traded on stock exchanges in the Czech Republic, Hungary, Poland, Slovakia and Russia whilst such securities may also be listed in other exchanges as depository receipts or certificates, or in other forms of instruments. Annual Review 2015 Manulife Investment-Linked Funds 80

83 NOTES TO THE FINANCIAL INFORMATION 31 DECEMBER 2015 (continued) 1. PRINCIPAL ACTIVITIES (continued) on 12 January 2015 Manulife Asian Small Cap Growth Fund ( MASCGF ) was launched. The objective of the MASCGF aims to achieve long term capital growth for investors who hold a long term investment view and are prepared to accept significant fluctuations in the value of their investments. MASCGF is a feeder fund and invests at least 95% of its Net Asset Value in Manulife Global Fund Asian Small Cap Equity Fund ( MGF-ASCEF ). MGF-ASCEF investment portfolio will be made on a diversified basis, for which its underlying securities will consist mainly of equity related investments and equities of smaller capitalization companies in the Asian and/or Pacific region. on 12 January 2015 Manulife Progress Fund ( MPF ) was also launched. The objective of the MPF aims to achieve long term capital growth at a reasonable level of risk by investing in a diversified portfolio of small to medium-sized public-listed companies listed on the Bursa Malaysia. The Manager of the Investment-Linked Funds is Manulife Insurance Berhad, a company incorporated in Malaysia, engaged principally in the underwriting of life insurance business including investment-linked business. 2. BASIS OF PREPARATION The financial information of the Investment-Linked Funds have been prepared in accordance with the accounting policies as described in Note 3 to the financial information and Guidelines on Investment-Linked Insurance/Takaful Business issued by Bank Negara Malaysia ( BNM ). The financial information of the Investment-Linked Funds have been prepared under the historical cost convention except as disclosed in the significant accounting policies in Note 3 to the financial information. 3. SIGNIFICANT ACCOUNTING POLICIES (a) Financial assets and liabilities (i) Classification A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. Annual Review 2015 Manulife Investment-Linked Funds 81

84 NOTES TO THE FINANCIAL INFORMATION 31 DECEMBER 2015 (continued) 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Financial assets and liabilities (continued) (i) Classification (continued) A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Investment-Linked Funds loans and receivables comprise loans, deposits with licensed financial institutions and other receivables. The Fund classifies payables as other financial liabilities. (ii) Recognition and measurement All purchases of investments are recognised on their trade dates, i.e. the date the commitment exists to purchase the investments. The investments are initially recorded at cost, being fair value of the consideration given. The attributable transaction costs are recognised in the profit or loss when incurred. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Investment-Linked Funds have transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired. Financial assets at fair value through profit or loss Investments of the Investment-Linked Funds are designated at initial recognition at fair value through profit or loss. After initial recognition, the investments are recorded at fair value and the unrealised gains or losses on re-measurement to fair value are taken to the statement of income and expenditure. The fair value of investments is determined by using open market valuation at the year-end date. Quoted equity investments are valued based on quoted market prices as at the date of the statements of financial position and the quoted market price used is the current bid price. Unquoted debt securities are initially recognised at fair value and subsequently re-measured at fair value based on the fair values quoted by a bond pricing agency. Annual Review 2015 Manulife Investment-Linked Funds 82

85 NOTES TO THE FINANCIAL INFORMATION 31 DECEMBER 2015 (continued) 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Financial assets and liabilities (continued) (ii) Recognition and measurement (continued) Financial assets at fair value through profit or loss (continued) Investment in foreign assets comprises investments under the Manulife Global Fund platform of mutual funds and is valued at the net asset values of the underlying funds as at the date of the statements of assets and liabilities. Other receivables loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less any impairment losses. loans are stated at valuation based on discounted future cash flows, taking into consideration of market conditions and contractual terms of the loans. collectability of loans and receivables is reviewed on an on going basis. An allowance account is used when there is objective evidence that the Investment- Linked Funds will not be able to collect all amounts due according to the original terms of the loans and receivables. 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 ). The amount of the impairment allowance is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognised in the statement of income and expenditure. When loans and receivables for which an impairment allowance had been recognised become uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to the statements of income and expenditure. Annual Review 2015 Manulife Investment-Linked Funds 83

86 NOTES TO THE FINANCIAL INFORMATION 31 DECEMBER 2015 (continued) 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Net creation of units Net creation of units represents premiums paid by policyholders as payment for a new contract or subsequent payments to increase the amount of that contract. Net creation of units is recognised on a receipt basis. (c) Net cancellation of units Net cancellation of units represents cancellation of units arising from surrenders and withdrawals by policyholders. Net cancellation of units is recognised upon surrendering of the related insurance contract. (d) Income recognition Interest income and profit sharing income earned are recognised on a time proportion basis that takes into account the effective yield of the assets. Dividend income is recognised when the right to receive payment is established. gains or loss on disposal of financial assets is calculated by comparing the net proceeds with the weighted average cost of the financial assets and is credited or charged to the statements of income and expenditure. (e) Management expenses Management expenses charged to the Funds include management fee, audit fee and tax fee and are recognised on accrual basis. (f) Foreign currencies (i) Functional and presentation currency Items included in the financial information of the Investment-Linked Funds are measured using the currency of the primary economic environment in which the Investment-Linked Funds operate ( the functional currency ). The functional currency and presentation currency of the Investment-Linked Funds is Ringgit Malaysia. Annual Review 2015 Manulife Investment-Linked Funds 84

87 NOTES TO THE FINANCIAL INFORMATION 31 DECEMBER 2015 (continued) 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (f) Foreign currencies (continued) (ii) Transactions and balances (g) Taxation Transactions in a currency other than the functional currency ( foreign currency ) are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Currency translation gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of income and expenditure. The income tax charge is calculated at current tax rate based on the method prescribed under the Income Tax Act, 1967 for life insurance business. Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences or unutilised tax losses can be utilised. Tax rate enacted or substantively enacted by the date of the statement of assets and liabilities is used to determine deferred tax. (h) Cash and cash equivalents cash and cash equivalents consist of cash and bank balances which have an insignificant risk of changes in value. Deposits with financial institutions are not part of cash and cash equivalents as these are held for investment purposes. Annual Review 2015 Manulife Investment-Linked Funds 85

88 NOTES TO THE FINANCIAL INFORMATION 31 DECEMBER 2015 (continued) 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continuously evaluated by the Manager and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Manager makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Fund s results and financial position are tested for sensitivity to changes in the underlying parameters. 5. AVERAGE ANNUAL RETURNS AND BENCHMARK The average annual return measurement and the performance against relevant benchmark indices of the Investment-Linked Funds for the comparative periods are set out on page 36 to 45 of the Fund Performance Report. 6. INVESTMENTS The details of investments and market values of investment holdings as a percentage of net asset value of the Investment-Linked Funds are set out on pages 54 to 67 of the Funds Performance Report. 7. COMPARATIVE PERFORMANCE TABLE The details of Investment-Linked Funds net asset value, units in circulation, percentage of the investment Linked funds investments by categories and industry sectors to the total funds value and the breakdown of the total annual returns of the Investment-Linked Funds into capital growth and income distribution composition of investments are set out on page 46 to 53 of the Funds Performance Report. 8. COMPARATIVE BALANCE There are no comparative figures provided for both Manulife Asian Small Cap Growth Fund and Manulife Progress Fund as these are the first sets of financial information prepared for the said funds since they were launched on 12 January Annual Review 2015 Manulife Investment-Linked Funds 86

89 STATEMENT BY MANAGER

90 STATEMENT BY MANAGER We, Dato Md Agil bin Mohd Natt and Mark Steven O Dell, two of the Directors of Manulife Insurance Berhad ( the Manager ), state that, in the opinion of the Manager, the accompanying financial information of Manulife Investment-Linked Funds, which consists of Equity Fund, Managed Fund, Dana Ekuiti Dinamik, Income Fund, Manulife Flexi Invest Fund, Manulife China Value Fund, Manulife Emerging Eastern Europe Fund, Manulife Asian Small Cap Growth Fund and Manulife Progress Fund set out on pages 68 to 86 have been prepared in accordance with the accounting policies described in Note 3 to the financial information and the Guidelines on Investment-Linked Insurance/Takaful Business issued by Bank Negara Malaysia. On behalf of the Manager, DATO MD AGIL BIN MOHD NATT DIRECTOR MARK STEVEN O DELL DIRECTOR Kuala Lumpur 23 March 2016 Annual Review 2015 Manulife Investment-Linked Funds 88

91 Independent auditors report

92 Independent auditors report Independent auditors report to the policyholders of Equity Fund, Managed Fund, Income Fund, Dana Ekuiti Dinamik, Manulife Flexi Invest Fund, Manulife Progress Fund, Manulife Emerging Eastern Europe Fund, Manulife China Value Fund and Manulife Asian Small Cap Growth Fund of Manulife Insurance Berhad (Incorporated in Malaysia) Report on the financial information We have audited the financial information of the Investment-Linked Funds (comprising of Equity Fund, Managed Fund, Dana Ekuiti Dinamik, Income Fund, Manulife Flexi Invest Fund, Manulife China Value Fund, Manulife Emerging Eastern Europe Fund, Manulife Asian Small Cap Growth Fund and Manulife Progress Fund) ( the Funds ) of Manulife Insurance Berhad, which comprise the statements of assets and liabilities as at 31 December 2015, and the statements of income and expenditure and statements of changes in net asset value for the financial year/period then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 68 to 86. Directors Responsibility for the Financial Information The directors of the Manager are responsible for the preparation of the financial information in accordance with the accounting policies as described in Note 3 to the financial information and the Guidelines on Investment-Linked Insurance/Takaful Business issued by Bank Negara Malaysia and for such internal control as the directors determine are necessary to enable the preparation of financial information that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial information based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial information are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial information. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial information, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Funds preparation of financial information in accordance with the accounting policies as described in the Note 3 to the financial information and the Guidelines on Investment-linked Insurance/Takaful Business issued by Bank Negara Malaysia 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 Funds internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial information. Annual Review 2015 Manulife Investment-Linked Funds 90

93 Independent auditors report (continued) Independent auditors report to the policyholders of Equity Fund, Managed Fund, Income Fund, Dana Ekuiti Dinamik, Manulife Flexi Invest Fund, Manulife Progress Fund, Manulife Emerging Eastern Europe Fund, Manulife China Value Fund and Manulife Asian Small Cap Growth Fund of Manulife Insurance Berhad (continued) (Incorporated in Malaysia) Report on the financial information (continued) Auditors Responsibility (continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial information of the Funds for the year/period ended 31 December 2015 are prepared, in all material respects, in accordance with the accounting policies as described in Note 3 to the financial information and the Guidelines on Investment-Linked Insurance/Takaful Business issued by Bank Negara Malaysia. Basis of Accounting Without modifying our opinion, we draw attention to Note 2 to the financial information, which describes the basis of preparation of the financial information. The financial information are prepared to assist the Manager to meet the requirements of the Guidelines on Investment-Linked Insurance/Takaful Business issued by Bank Negara Malaysia. As a result, the financial information may not be suitable for another purpose. Other Matters This report is made solely to the policyholders of the Funds, as a body, in accordance with the Guidelines on Investment-Linked Insurance/Takaful Business issued by Bank Negara Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants brandon Bruce Sta Maria No. 2937/09/17(J) chartered Accountant Kuala Lumpur 23 March 2016 Annual Review 2015 Manulife Investment-Linked Funds 91

94 mengenai Manulife Malaysia Manulife Insurance Berhad, sebuah subsidiari milik penuh Manulife Holdings Berhad adalah ahli Manulife Financial Corporation yang berasas di Kanada. Manulife Insurance Berhad kini memberi khidmat kepada lebih daripada 290,000 pemegang polisi. Melalui syarikat-syarikat subsidiarinya, Manulife Group menawarkan produk dan perkhidmatan perlindungan kewangan dan pengurusan harta yang inovatif bagi memenuhi pelbagai keperluan pelanggan. Manulife Holdings Berhad telah disenaraikan di Papan Utama Bursa Malaysia sejak tahun Pada 31 Disember 2015, aset dalam pengurusan bernilai lebih RM7.8 bilion.