ASIA-PACIFIC REIT FUND

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2 CONTENTS PAGE 1 General Information 1 2 Manager s Report 2 3 Policy On Stockbroking Rebates And Soft Commissions 8 4 Statement By The Manager 9 5 Trustee s Report 10 6 Statement Of Comprehensive Income 11 7 Statement Of Financial Position 12 8 Statement Of Changes In Equity 13 9 Statement Of Cash Flows Summary Of Significant Accounting Policies Notes To The Financial Statements Corporate Information 39 i

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4 MANULIFE INVESTMENT ASIA-PACIFIC REIT FUND 1 GENERAL INFORMATION 1.1 THE TRUST The Fund commenced operations on 7 June 2007 and will continue its operations until terminated as provided under Clause 48.2 of the Deed. 1.2 FUND TYPE / CATEGORY Income and Growth / Fund-of-Funds 1.3 OBJECTIVE OF THE FUND To provide long-term capital appreciation and sustainable income through a combined investment in other collective investment schemes, namely Real Estate Investment Trusts (REITs) and infrastructure funds/trusts. Note: Any material changes to the Fund s investment objective would require Unit Holders approval. 1.4 DISTRIBUTION POLICY Semi-annually, if any. Subject to the availability of income, the Manager has the discretion to declare distribution at a higher frequency. 1.5 PERFORMANCE BENCHMARK The performance of the Fund is measured against the Manulife Investment Asia REIT Ex- Japan Index (MRI) or any other equivalent benchmark to be determined by the Manager. It is an internally customised index. 1.6 INVESTMENT STYLE AND STRATEGY The Fund invests in REITs and infrastructure funds/trusts that are listed on Asia-Pacific stock exchanges. The Fund focuses on REITs and infrastructure funds/trusts that display a potential for capital appreciation. The infrastructure funds/trusts focus primarily on but are not limited to utilities, transportation/ logistics and communications:- Utilities include facilities for the recycling, treatment, distribution and supply of water, as well as facilities for the generation, transmission, distribution and supply of electricity and gas. Transportation/logistics include toll roads, railways, storage terminals, airports and seaports. Communications comprise broadcast transmission infrastructures, satellite systems and terrestrial wireline and wireless network infrastructures. The Fund Manager focuses primarily on China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Australia. During the six-month financial period under review, the Fund remained guided by its investment objective to invest in REITS and infrastructure funds in Asia-Pacific. 1

5 2 MANAGER S REPORT 2.1 FUND PERFORMANCE For the six-month financial period ended 28 February 2018, the Fund s return decreased by 3.71% as its returns were dragged down by adverse currency movements. The Fund outperformed its benchmark return, which declined by 5.38%. The Fund s outperformance was mainly due to its country allocations and relatively high cash holdings during the period. The distribution of 1.47sen per unit on 26 February 2018 had the effect of reducing the NAV per unit of the Fund. The ex-distribution NAV per unit was RM The graph below compares the 6-month performance of the Fund against its benchmark return: 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% Aug 17 Fund Performance vs. Benchmark Index Return Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Manulife Investment Asia-Pacific REIT Fund Return Benchmark Index Return Feb 18 Source: Lipper, Bloomberg/ Factset Fund Size The Fund s total NAV increased to RM370.53mil from RM186.74mil during the six-month financial period ended under review. Fund s Returns (a) The graph below compares the 5-year performance of the Fund against its benchmark return: 80% 60% 40% 20% 0% -20% -40% Feb 13 Jun 13 Fund Performance vs. Benchmark Index Return Oct 13 Feb Jun Oct 14 Source: Lipper, Bloomberg/ Factset Feb Jun Oct 15 Feb Jun Oct 16 Feb Jun Oct Manulife Investment Asia-Pacific REIT Fund Return Benchmark Index Return Feb 18 2

6 (b) Average Total Return of the Fund: For the financial period ended 28 February 2018 Fund (% p.a.) Benchmark (% p.a.) 1 year years years Commencement Date: 7 June 2007 Source: Lipper, Bloomberg/ Factset (c) Annual Total Return of the Fund: For the financial period ended: Fund (% p.a.) Benchmark (% p.a.) 28 February February February February February 2014 (6.27) (29.79) Commencement Date: 7 June 2007 Source: Lipper, Bloomberg/ Factset BASES OF CALCULATION 1. Net Asset Value (NAV) Net Asset Value of the Fund is determined by deducting the value of all the Fund s liabilities from the value of all the Fund s assets, at the valuation point. 2. Net Asset Value per unit Net Asset Value per unit is the net asset value of the Fund divided by the total number of units in circulation, at the valuation point. 3. Fund s Return Fund s return can be calculated based on the computation methods as follows: Daily Total Fund s Return = {[End NAV (Ex-distribution) - Beginning NAV + Dividend Distribution] / Beginning NAV} x 100% Total Fund s Return Average Total Return = Total Fund s return for the period is derived from geometrically linking together the daily total fund s returns. The linking formula is = [(1+ R 1 ) x (1+ R 2 ) x (1+ R n )] -1 where: R 1 is the first daily return for the period, R 2 is the second daily return for the period, and R n is the last daily return for the period. = Annualised Total Return (Actual number of days in a year/ [(1+ Total fund s return for the period) number of days during the period) -1] x 100% 3

7 The following table shows other financial and performance data of the Fund for the past three financial periods: Fund Data 28 February February February 2016 NAV (RM) 370,528, ,305,017 24,632,610 Units in Circulation ( 000) 836, ,162 58,072 NAV (RM per unit) Highest / Lowest NAV (RM per unit) Total Fund Return (%) NAV Return (%) Income Return (%) Final Distribution Gross (RM) Net (RM) Ex-date / (3.71) (6.79) / / Management Expenses Ratio (%) Portfolio Turnover Ratio (times) NOTES (i) Management Expenses Ratio (MER) MER can be calculated based on the ratio of the sum of fees and the recovered expenses of the unit trust fund to the average value of the unit trust fund calculated on a daily basis. Fees of the unit trust fund + Recovered expenses of the unit trust fund Average value of the unit trust fund calculated on a daily basis x 100 Where: Fees Recovered expenses Average value of the unit trust fund = All ongoing fees deducted / deductible directly from the unit trust fund in respect of the period covered by the management expense ratio, expressed as a fixed amount, calculated on a daily basis. This would include the annual management fee, the annual trustee fee and any other fees deducted / deductible directly from the unit trust fund; = All expenses recovered from/ charged to the unit trust fund, as a result of the expenses incurred by the operation of the unit trust fund, expressed as a fixed amount. This should not include expenses that would otherwise be incurred by an individual investor (e.g. brokerage, taxes and levies); and = The NAV of the unit trust fund, including unit trust net income value of the fund, less expenses on an accrued basis, in respect of the period covered by the management expense ratio, calculated on a daily basis. The MER for the financial period is lower as compared with the previous financial period mainly due to increase in average fund size. 4

8 (ii) Portfolio Turnover Ratio (PTR) PTR can be calculated based on the ratio of the average sum of acquisitions and disposals of the unit trust fund for the year to the average value of the unit trust fund for the year calculated on a daily basis [Total acquisitions of the fund for the period + Total disposals of the fund for the period]/2 Average value of the unit trust fund calculated on a daily basis The PTR for the financial period is higher as compared with the previous financial period mainly due to increase in average fund size. Impact On NAV Arising From Distribution Distributed For The Financial period Ended 28 February 2018 Details Cum date 23 February 2018 NAV before distribution (RM per unit) Less: Distribution (RM per unit) (0.0147) NAV after distribution (RM per unit) The Manager wishes to highlight that past performance of the Fund is not an indication of future performance. The price of units and the investment returns may go down, as well as up. 2.2 ASSET ALLOCATION Asset allocation for the past three financial periods: Sector Allocation 28 February 2018 % of Net Asset Value 28 February February 2016 Quoted REITs - Foreign Quoted REITs - Local Total Quoted Investments Deposits with Licensed Financial Institutions Other Assets & Liabilities

9 Country Allocation 28 February 2018 % of Net Asset Value 28 February February 2016 Singapore Hong Kong/China Australia Malaysia Thailand Total Investments As at 28 February 2018, the Fund was 91.03% invested in REITs and infrastructure funds, and 8.97% in cash instruments. 2.3 MARKET REVIEW For the six-month financial period ended 28 February 2018 (from 1 September 2017 to 28 February 2018), major REIT markets in Asia, except Australia, closed in positive territory in local currency terms. During the period, Asia REITS fared well before giving back the bulk of the initial gains from January 2018 onwards. Investors took profit on the asset class as a weak USD, rebound in oil price and strong labour data fuelled inflationary concerns in the US. The 10-year government bond yields in most Asia markets expanded during this period, following the sharp spike in US bond yield. Singapore and Hong Kong REITs held up relatively well. Macro data points remain supportive of real estate fundamentals with the broadening of economic growth momentum and the peaking of physical real estate supply across key segments. Results unveiled during the reporting season for 2017 came in largely in line with expectations with most REIT managers guiding for a more optimistic outlook for the rental markets. Australia REIT market was the worst performing market due to the sharp spike in bond yields. This follows growing concerns over slowing residential sales in core markets as well as continued headwinds for local retail sales. Selected REITs like Goodman Group, which raised their earnings guidance for 2018, managed to outperform the broader market 2.4 MARKET OUTLOOK AND INVESTMENT STRATEGY With investors increasingly wary of the possibility of a faster-than-expected rate hike scenario playing out, inflationary expectations would continue to be the main leading macro factor to watch. We believe the current correction in Asia ex-japan REITs should not be as painful as the 20% correction (in USD terms) seen back in 2013 when the quantitative easing tapering concern was first raised by the US. Then, the adjustment in the US 10-year bond yield was of a much bigger quantum (over 100bps). This is because the real estate fundamentals are looking more favourable now against a backdrop of synchronised recovery in global economy. We stay overweight in sectors with pricing power and exposure to the improving economy. 6

10 2.5 BREAKDOWN OF UNIT HOLDINGS BY SIZE AS AT 28 FEBRUARY 2018 The following table presents the distribution of the Fund s unit holders according to size of unit holdings: Size of Holdings No. of Unit Holders % No. of Units Held ( 000) % 5,000 and below 1, , ,001 to 10, , ,001 to 50,000 2, , ,001 to 500, , Above 500, , Manager s stock Total 5, ,

11 3 POLICY ON STOCKBROKING REBATES AND SOFT COMMISSIONS The Management Company did not retain any rebates. For the six months financial period ended 28 February 2018, the Management Company or its Fund Manager did not receive any rebates or soft commissions. 8

12 4 STATEMENT BY THE MANAGER MANULIFE INVESTMENT We, Edmond Cheah Swee Leng and Chong Soon Min, being two of the Directors of Manulife Asset Management Services Berhad (the Manager ), do hereby state that, in the opinion of the Manager, the unaudited financial statements comprising the statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, summary of significant accounting policies and notes to the financial statements, are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 28 February 2018 and of its financial performance, changes in equity and cash flows of the Fund for the six months financial period ended 28 February 2018 in accordance with the Malaysian Financial Reporting Standards ( MFRS ) and the International Financial Reporting Standards ( IFRS ). For and on behalf of the Manager MANULIFE ASSET MANAGEMENT SERVICES BERHAD EDMOND CHEAH SWEE LENG Director CHONG SOON MIN Director Kuala Lumpur 23 April

13 5 TRUSTEE S REPORT TO THE UNIT HOLDERS OF MANULIFE INVESTMENT We have acted as Trustee of Manulife Investment Asia-Pacific REIT Fund ( the Fund ) for the financial period ended 28 February To the best of our knowledge, Manulife Asset Management Services Berhad ( the Management Company ), has operated and managed the Fund in accordance with the following:- a) limitations imposed on the investment powers of the Management Company and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and c) creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirements. During this financial period, a total distribution of 1.47 sen per unit (gross) has been distributed to the unit holders of the Fund. We are of the view that the distribution is not inconsistent with the objective of the Fund For HSBC (MALAYSIA) TRUSTEE BERHAD Tan Bee Nie Head, Trustee Operations Kuala Lumpur 23 April

14 6 STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 28 FEBRUARY 2018 INVESTMENT (LOSS)/INCOME Note Interest income 187,527 11,215 Gross dividend income 6,720,471 2,272,240 Net (loss)/gain on financial assets at fair value through profit or loss 6 (16,163,785) 2,929,414 Net loss on forward foreign currency contracts (506,784) (63,679) RM RM (9,762,571) 5,149,190 EXPENSES Manager s fee 3 2,402, ,047 Trustee s fee 4 82,371 29,007 Auditors remuneration 2,727 2,727 Tax agent s fee 1,339 1,339 Other expenses 264, ,414 Transaction costs 560, ,727 3,314,012 1,142,261 (LOSS)/PROFIT BEFORE TAXATION (13,076,583) 4,006,929 TAXATION 5 (510,737) (219,398) (LOSS)/PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE (LOSS)/INCOME (13,587,320) 3,787,531 (Loss)/profit after taxation is made up as follows: Realised 4,262,667 1,788,697 Unrealised (17,849,987) 1,998,834 (13,587,320) 3,787,531 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 11

15 7 STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2018 ASSETS Note RM RM Financial assets at fair value through profit or loss 6 337,283, ,542,740 Amount due from Manager 14,788,637 5,986,879 Dividends receivable 243, ,088 Cash and cash equivalents 7 42,507,961 9,224,318 TOTAL ASSETS 394,823, ,106,025 LIABILITIES Amount due to Manager - Manager s fee 477, ,873 Amount due to Trustee 16,369 5,241 Amount due to stockbrokers 11,927,703 6,605,888 Other payables 8 38,154 37,006 Distribution payable 11,835,440 - TOTAL LIABILITIES 24,295,100 6,801,008 NET ASSET VALUE ( NAV ) OF THE FUND 370,528, ,305,017 EQUITY Unit holders capital 359,897, ,024,684 Retained earnings 10,631,139 14,280, ,528, ,305,017 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 2 370,528, ,305,017 NUMBER OF UNITS IN CIRCULATION 9 836,102, ,162,000 NAV PER UNIT The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 12

16 8 STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 28 FEBRUARY 2018 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 SEPTEMBER ,324,609 25,402, ,726,612 Movement in unit holders contribution: Creation of units arising from applications 207,720, ,720,311 Creation of units arising from distribution 11,835,440 11,835,440 Cancellation of units (10,331,461) - (10,331,461) Total comprehensive loss - (13,587,320) (13,587,320) Distribution (Note 15) (10,651,896) (1,183,544) (11,835,440) BALANCE AS AT 28 FEBRUARY ,897,003 10,631, ,528,142 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 SEPTEMBER ,432,766 10,492,802 72,925,568 Movement in unit holders contribution: Creation of units 56,945,960-56,945,960 Cancellation of units (8,354,042) - (8,354,042) Total comprehensive income - 3,787,531 3,787,531 BALANCE AS AT 28 FEBRUARY ,024,684 14,280, ,305,017 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 13

17 9 STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 28 FEBRUARY 2018 Note RM RM CASH FLOWS FROM OPERATING ACTIVITIES Purchase of investments (198,637,243) (53,180,039) Sale of investments 25,112,598 6,907,413 Net realised foreign exchange (loss)/gain (782,326) 430,707 Dividends received 6,365,717 2,039,462 Interest income received 187,527 11,215 Manager s fee paid (2,186,907) (838,810) Trustee s fee paid (74,980) (28,759) Audit fee paid (6,296) (5,830) Tax agent s fee paid (9,074) - Payment for other fees and expenses (231,026) (52,616) Net cash used in operating activities (170,262,010) (44,717,257) CASH FLOWS FROM FINANCING ACTIVITIES Distribution paid (8,640,057) (3,697,550) Proceeds from creation of units 218,943,059 59,505,993 Payments for cancellation of units (10,331,461) (8,354,042) Net cash generated from financing activities 199,971,541 47,454,401 Net increase in cash and cash equivalents 29,709,531 2,737,144 Currency translation differences (250,696) 68,937 Cash and cash equivalents at the beginning of the financial period 13,049,125 6,418,237 Cash and cash equivalents at end of the financial period 42,507,961 9,224,318 Cash and cash equivalents comprise: Deposit with licensed financial institutions 27,587,438 - Bank balances in a licensed bank 14,920,523 9,224, ,507,961 9,224,318 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 14

18 10 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 28 FEBRUARY 2018 The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. The policies have been consistently applied to all the financial years presented, unless otherwise stated. A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The unaudited financial statements of the Fund have been prepared in accordance with the Malaysian Financial Reporting Standards ( MFRS ) and the International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. The preparation of financial statements in conformity with MFRS and IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires the Manager to exercise judgement in the process of applying the Fund s accounting policies. Although these estimates and judgement are based on the Manager s best knowledge of current events and actions, actual results may differ. There are no significant areas of judgement or complexity that have significant effect on the amounts recognised in the financial statements. There are no critical accounting estimates and assumptions used in the preparation of the financial statements of the Fund for the six months financial period ended 28 February The Fund has applied the following amendments for the first time for the financial period beginning 1 March 2017: Amendments to MFRS 107 Statement of Cash Flows - Disclosure Initiatives (effective from 1 March 2017) introduce an additional disclosure in changes in liabilities arising from financing activities. The adoption of the Amendments to MFRS 107 has required additional disclosure of changes in liabilities arising from financing activities. Other than that, the adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. Financial period beginning on/after 1 March 2018 MFRS 9 Financial Instruments (effective from 1 January 2018) will replace MFRS 139 Financial Instruments: Recognition and Measurement. MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised cost, fair value through profit or loss and fair value through other comprehensive income ( OCI ). The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investment in equity instruments is always measured at fair value through profit or loss with a irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. 15

19 For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in OCI rather than the income statement, unless this creates an accounting mismatch. MFRS 9 introduces an expected credit losses model on impairment that replaces the incurred loss impairment model used in MFRS 139. The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. B (i) FINANCIAL ASSETS AND FINANCIAL LIABILITIES Classification The Fund classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition. Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial assets at fair value through profit or loss Financial assets are designated at fair value through profit or loss when they are managed principally for the purposes of selling or repurchasing in the near term and their performance are evaluated on a fair value basis. The Fund designates its investment in quoted investments as financial assets at fair value through profit or loss at inception. Loans and Receivables Loans and Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Fund s loans and receivables comprise amount due from Manager, dividends receivable and cash and cash equivalents in the statement of financial position. Other financial liabilities The Fund classifies amount due to Manager, amount due to Trustee, amount due to stockbrokers, other payables and distribution payable as other financial liabilities. (ii) Recognition and initial measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Fund commits to purchase or sell the assets. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in profit or loss. Receivables are initially recognised at fair value plus transaction costs. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. 16

20 (iii) Subsequent measurement - gains and losses MANULIFE INVESTMENT Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are included in the profit or loss in the financial period which they arise. Receivables are subsequently carried at amortised cost using the effective interest rate method. (iv) Subsequent measurement - impairment of financial assets The Fund assesses at the end of the reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Fund uses to determine that there is objective evidence of an impairment loss include indications that the obligor is experiencing significant financial difficulty, high probability that the obligor will enter bankruptcy or other distressed financial reorganisation and events that would adversely affect the financial capability of the obligor. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Fund may measure impairment on the basis of an instrument s fair value by using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment is recognised (such as an improvement in the debtor s/issuer s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. (v) De-recognition Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Financial liabilities are de-recognised when they are extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or has expired. C CREATION AND CANCELLATION OF UNITS The Fund issues cancellable units, which are cancelled at the unit holder s option and are classified as equity. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s net asset value. The outstanding unit is carried at the redemption amount that is payable at the date of the statement of financial position if the unit holder exercises the right to put the unit back to the Fund. 17

21 Units are created and cancelled at the unit holder s option at prices based on the Fund s net asset value per unit at the time of creation and cancellation. The Fund s net asset value is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. The net asset value per unit is computed each dealing day. The price at which units are created or cancelled is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day. Units in the Fund are classified as equity in the statement of financial position and are stated at fair value representing the price at which unit holders can redeem the units from the Fund. D INCOME RECOGNITION Interest income from deposits, on an accrual basis using the effective interest rate method. Dividend income on quoted investments is recognised on the ex-dividend date. Realised gains or losses on sale of quoted investments are accounted for as the difference between the net disposal proceeds and the carrying amount of the investments, determined on a weighted average cost basis. E EXPENSES Expenses are accounted for on an accrual basis and charged to the statement of comprehensive income. Expenses arising from net disposal of investments are recognised as transaction costs (Note L to the financial statements). F AMOUNT DUE FROM/TO STOCKBROKERS Amounts due from and to stockbrokers represent receivables for securities sold and payables for securities purchased that have been contracted for but not yet settled or delivered on the statement of financial position date respectively. These amounts are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment for amount due from stockbrokers. A provision for impairment of amount due from a stockbroker is established when there is objective evidence that the Fund will not be able to collect the amount due from the relevant stockbroker. Significant financial difficulties of the stockbroker, probability that the stockbroker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from the stockbroker is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest to discount the future cash flows for the purpose of measuring the impairment loss. The effective interest rate method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Fund estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. 18

22 G CASH AND CASH EQUIVALENTS For the purpose of statement of cash flows, cash and cash equivalents comprise cash at banks and deposits held in highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value. H CURRENCY TRANSLATION The financial statements are presented in Ringgit Malaysia, which is the Fund s functional and presentation currency. Transactions in foreign currencies during the financial year are converted to Ringgit Malaysia at rate of exchange ruling at transaction dates. Assets and liabilities denominated in foreign currencies at the date of the statement of financial position are translated into Ringgit Malaysia at the rate of exchange approximating those ruling on that date. Exchange differences arising from the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are included in the statement of comprehensive income. I FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and the measurement date. The information presented herein represents the estimates of fair value as at the date of the statement of financial position. Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates. A range of methodologies and assumptions has been used in deriving the fair values of the Fund s financial instruments as at the date of statement of financial position. The total fair value of each financial instrument is not materially different from the total carrying value. The fair values are based on the following methodologies and assumptions: (a) Short-term deposits with financial institutions For deposits and placements with financial institutions with maturities of less than three months, the carrying value is a reasonable estimate of fair value. For deposits and placements with maturities of three months and above, the estimated fair value is based on discounted cash flows by using prevailing interbank money market rates at which similar deposits and placements would be made with financial institutions of similar credit risk and remaining period to maturity. (b) Quoted investments The estimated fair value is based on quoted and observable market prices. (c) Other short-term financial instruments Other short-term financial instruments comprise amount due from/to Manager, amount due to stockbrokers, dividends receivable, other receivables, amount due to Trustee, other payables and distribution payable. The carrying values of the assets and liabilities are assumed to approximate their fair values due to the short tenure of less than one year. 19

23 J TAXATION Current tax expense is determined according to the tax laws in the jurisdictions of the taxable profit earned during the financial year from the financial assets in which the Fund invests and includes all taxes based upon the taxable profit. K SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the strategic asset allocation committee of the Manager that makes the strategic decisions. L TRANSACTION COSTS Transaction costs are costs incurred to acquire or dispose of financial assets or liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses. 20

24 11 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 28 FEBRUARY INFORMATION ON THE FUND Manulife Investment Asia-Pacific REIT Fund ( the Fund ) was established pursuant to a Master Deed dated 31 January 2002, as amended and supplemented by subsequent Supplemental Deed (hereinafter referred to as the Deed ) between Manulife Asset Management Services Berhad ( the Manager ) and HSBC (Malaysia) Trustee Berhad ( the Trustee ). The principal activity of the Fund is to invest in Investments as defined under Clause 1 of the Deed, which includes stocks and securities of companies listed on Bursa Malaysia Berhad and foreign securities listed on any recognised Stock Exchange(s) subject to approval by Bank Negara Malaysia and the Securities Commission, unlisted securities of a Malaysian issuer, deposits with financial institutions, quoted and unquoted fixed income securities. The Fund commenced operations on 7 June 2007 and will continue its operations until terminated as provided under Clause 48.2 of the Deed. The main objective of the Fund is to provide unit holders with long-term capital appreciation and sustainable income through a combined investment in other collective investment schemes, namely REITs and infrastructure funds/trusts. The Manager of the Fund, a company incorporated in Malaysia, is a wholly-owned subsidiary of Manulife Holdings Berhad, a public limited liability company, incorporated and domiciled in Malaysia, and listed on the main market of Bursa Malaysia. Its principal activities are the management of unit trusts, private retirement schemes, fund management activities and financial planning. The financial statements were authorised for issue by the Board of Directors of the Manager in accordance with a resolution of the Directors on 23 April NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS The net assets attributable to unit holders meet the definition of puttable instruments classified as equity instruments under MFRS 132 Financial Instruments: Presentation. The units in the Fund are puttable instruments which entitle the unit holders to a pro-rata share of the net assets of the Fund. The units are subordinated and have identical features. There is no contractual obligation to deliver cash or another financial asset other than the obligation on the Fund to repurchase the units. The total expected cash flows from the units in the Fund over the life of the units are based on the change in the net assets of the Fund. 3 MANAGER S FEE In accordance with the Deed, the Manager is entitled to Manager s fee at a rate of 1.75% per annum of the net asset value of the Fund before deducting Trustee s fee and Manager s fee for the day, calculated on a daily basis. There will be no further liability to the Manager in respect of Manager s fee other than the amount recognised above. 4 TRUSTEE'S FEE In accordance with the Deed, the Trustee is entitled to a fee of 0.06% per annum of the net asset value of the Fund before deducting Trustee s fee and Manager s fee for the day, calculated on a daily basis. There will be no further liability to the Trustee in respect of Trustee s fee other than the amount recognised above. 21

25 5 TAXATION RM RM Current taxation - Local tax 510,737 16,300 - Foreign tax - 203, , ,398 Numerical reconciliation between (loss)/profit before taxation multiplied by the Malaysian statutory tax rate and tax expenses of the Fund is as follows: RM RM (Loss)/profit before taxation (13,076,583) 4,006,929 Tax calculated at Malaysian tax rate of 24% (2017: 24%) (3,138,380) 961,663 Tax effect in respect of: - Expenses not deductible for tax purposes 215,176 68,384 - Restriction on tax deductible expenses for unit trust funds 580, ,758 - Investment income not subject to tax 2,286,017 (1,196,685) - Investment income subject to different tax rate 446, ,278 - Effect of foreign tax on foreign taxable income 121,628 - Tax expenses 510, ,398 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS RM RM Designated at fair value through profit or loss - Quoted investments-local (Note 6(a)) 10,168,269 9,197,926 - Quoted investments-foreign (Note 6(b)) 327,115, ,344, ,283, ,542,740 Net (loss)/gain on financial assets at fair value through profit or loss Realised 1,435, ,517 - Unrealised (17,599,292) 1,929,897 RM RM (16,163,785) 2,929,414 22

26 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (a) QUOTED INVESTMENTS - LOCAL QUOTED INVESTMENTS Quantity MAIN MARKET REAL ESTATE INVESTMENTS TRUSTS(REITs) Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % IGB Real Estate Investment Trust 2,056,300 3,208,970 3,166, Pavillion Real Estate Investment Trust 1,853,500 3,135,533 2,483, Sunway Real Estate Investment Trust 2,673,300 4,502,205 4,517, ,583,100 10,846,708 10,168, TOTAL QUOTED INVESTMENTS - LOCAL 6,583,100 10,846,708 10,168, (b) QUOTED INVESTMENTS -FOREIGN QUOTED INVESTMENTS Quantity AUSTRALIA REAL ESTATE INVESTMENT TRUSTS (REITs) Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Dexus Property Group 280,954 8,354,918 7,973, Goodman Group 309,102 7,882,329 7,744, Mirvac Group 682,102 4,526,423 4,412, Scentre Group 599,063 7,845,485 7,019, Viva Energy Real Estate Investment Trust Limited 594,925 3,712,630 3,667, ,466,146 32,321,785 30,817,

27 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (b) QUOTED INVESTMENTS - FOREIGN (CONTINUED) QUOTED INVESTMENTS Quantity HONG KONG/CHINA REAL ESTATE INVESTMENT TRUSTS (REITs) Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Champion Real Estate Investment Trust Limited 2,995,000 8,271,538 8,344, Fortune Real Estate Investment Trust Limited 1,948,000 9,127,310 9,081, Prosperity Real Estate Investment Trust Limited 3,081,000 5,179,507 5,178, Sunlight Real Estate Investment Trust Limited 2,184,000 5,649,910 5,953, Link Real Estate Investment Trust Limited 995,000 30,920,946 33,296, ,203,000 59,149,211 61,853, SINGAPORE REAL ESTATE INVESTMENT TRUSTS (REITs) Ascendas Real Estate Investment Trust Limited 1,725,564 13,043,435 13,527, Capitaland Commercial Trust 5,041,809 25,303,984 25,802, Capitaland Mall Trust 3,639,700 22,409,464 21,749, Capitaland Retail China Trust 1,333,500 5,792,468 6,311, CDL Hospitality Trusts 3,257,900 16,938,214 15,998, Far East Hospitality Trust 6,746,900 14,815,727 13,971, Fraser Commercial Trust 1,494,600 6,242,285 6,322, Frasers Centrepoint Trust 2,136,500 13,784,671 13,967, Frasers Logistic & Industrial Trust 3,410,000 10,407,948 10,995, Keppel Real Estate Investment Trust 5,360,450 19,497,086 18,711, Mappletree Commercial Trust 4,326,223 20,330,345 20,092, Mapletree Greater China Commercial Trust 2,989,300 9,677,472 10,523,

28 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (b) QUOTED INVESTMENTS - FOREIGN (CONTINUED) QUOTED INVESTMENTS Quantity SINGAPORE (CONTINUED) REAL ESTATE INVESTMENT TRUSTS (REITs) (CONTINUED) Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Mapletree Industrial Trust 2,952,700 16,657,086 17,119, Mapletree Logistics Trust 3,277,190 12,601,649 11,633, SPH Real Estate Investment Trust 3,849,400 11,546,280 11,387, Suntec Real Estate Investment Trust 2,012,400 11,439,413 11,787, ,554, ,487, ,900, THAILAND REAL ESTATE INVESTMENT TRUSTS (REITs) CPN Retail Growth Leasehold Investment Trust 1,620,100 4,444,140 4,543, TOTAL QUOTED INVESTMENTS - FOREIGN 68,843, ,402, ,115, TOTAL QUOTED INVESTMENTS 75,426, ,249, ,283, ACCUMULATED UNREALISED GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 34,031 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 337,283,402 25

29 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (a) QUOTED INVESTMENTS - LOCAL QUOTED INVESTMENTS Quantity MAIN MARKET REAL ESTATE INVESTMENT TRUSTS(REITs) Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Capitaland Malaysia Mall Trust 1,433,000 2,181,455 2,221, IGB Real Estate Investment Trust 1,726,400 2,644,963 2,865, Pavillion Real Estate Investment Trust 1,326,400 2,210,148 2,294, Sunway Real Estate Investment Trust 1,068,400 1,734,629 1,816, ,554,200 8,771,195 9,197, TOTAL QUOTED INVESTMENTS - LOCAL 5,554,200 8,771,195 9,197, (b) QUOTED INVESTMENTS - FOREIGN QUOTED INVESTMENTS Quantity AUSTRALIA REAL ESTATE INVESTMENT TRUSTS (REITs) Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Dexus Property Group 74,397 2,110,441 2,396, Mirvac Group 552,102 3,573,905 4,050, Scentre Group 253,000 3,417,059 3,763, Stockland Corporation Limited 136,000 1,856,144 2,190, Vicinity Centres 314,141 3,032,566 3,097, Viva Energy Real Estate Investment Trust Limited 233,000 1,764,366 1,908, ,562,640 15,754,481 17,406,

30 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (b) QUOTED INVESTMENTS - FOREIGN (CONTINUED) QUOTED INVESTMENTS Quantity HONG KONG/CHINA REAL ESTATE INVESTMENT TRUSTS (REITs) Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Champion Real Estate Investment Trust Limited 1,553,000 3,709,624 3,961, Fortune Real Estate Investment Trust Limited 1,042,000 4,625,753 5,190, Prosperity Real Estate Investment Trust Limited 1,756,000 2,785,911 3,193, Sunlight Real Estate Investment Trust Limited 899,000 2,106,402 2,349, Link Real Estate Investment Trust Limited 364,500 9,729,554 11,162, ,614,500 22,957,244 25,857, SINGAPORE REAL ESTATE INVESTMENT TRUSTS (REITs) Ascendas Real Estate Investment Trust Limited 841,964 5,880,155 6,681, Capitaland Commercial Trust 1,129,800 5,040,853 5,594, Capitaland Mall Trust 732,200 4,429,322 4,578, Capitaland Retail China Trust 684,000 2,907,842 3,093, Frasers Centrepoint Trust 760,600 4,479,525 4,828, Frasers Logistic & Industrial Trust 1,597,300 4,526,442 4,943, Keppel Real Estate Investment Trust 800,060 2,602,599 2,628, Mappletree Commercial Trust 1,325,523 5,834,314 6,311, Mapletree Greater China Commercial Trust 1,376,000 3,903,174 4,302, Mapletree Industrial Trust 832,200 4,232,637 4,398, Mapletree Logistics Trust 268, , , Parkway Life Real Estate Investment Trust 600,000 4,473,825 4,627, SPH Real Estate Investment Trust 1,133,000 3,234,821 3,488,

31 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) (b) QUOTED INVESTMENTS - FOREIGN (CONTINUED) QUOTED INVESTMENTS Quantity SINGAPORE (CONTINUED) Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % REAL ESTATE INVESTMENT TRUSTS (REITs) (CONTINUED) Starhill Global Real Estate Investment Trust 2,347,200 5,380,190 5,513, Suntec Real Estate I nvestment Trust 396,100 2,140,969 2,175, ,824,776 59,845,747 64,080, TOTAL QUOTED INVESTMENTS - FOREIGN 22,001,916 98,557, ,344, TOTAL QUOTED INVESTMENTS 27,556, ,328, ,542, ACCUMULATED UNREALISED GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 9,214,073 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 116,542,740 7 CASH AND CASH EQUIVALENTS RM RM Deposits with licensed financial institutions 27,587,438 - Bank balances in a licensed bank 14,920,523 9,224,318 42,507,961 9,224,318 Weighted average rates of return are as follows: % Short-term deposits with licensed financial institutions 3.20 The deposits have an average maturity of 1 day ( : nil). 28

32 8 OTHER PAYABLES RM RM Auditors remuneration 2,397 2,837 Tax agent s fee 2,379 8,239 Sundry payables and accruals 33,378 25,930 38,154 37,006 9 UNITS IN CIRCULATION No. of units No. of units At beginning of the financial period 392,682, ,422,000 Add: Creation of units arising from applications 438,005, ,350,000 Add: Creation of units arising from distribution 26,614,437 - Less: Cancellation of units (21,200,000) (18,610,000) At end of the financial period 836,102, ,162, BROKERS TRANSACTIONS The details of transactions with dealers/brokers by value of trades are as follows: Name of dealers/brokers Value of trades Percentage of total trades Brokerage fees Percentage of total brokerage fees RM % RM % 2018 Citigroup Global Markets Asia Limited 32,292, , J.P.Morgan Securities Asia Pacific Limited 31,232, , Instinet Pacific Limited 30,081, , Credit Suisse (HK) Limited 29,258, , UOB Kay Hian Private Limited 25,318, , CLSA Limited 17,817, , China International Capital Corporation (HK) Securities 14,357, , Others 55,042, , ,400, , For the six months financial period ended 28 February 2018, details of transaction with brokers by value of trades apply only to equities and unquoted fixed income securities transactions. This took effect on 24 May 2017 as per Securities Commission s Guidelines on Unit Trust Funds. 29