INDONESIA EQUITY 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 35 i

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4 MANULIFE INVESTMENT INDONESIA EQUITY FUND 1 GENERAL INFORMATION 1.1 THE TRUST The Fund commenced operations on 19 October 2010 and will continue its operations until terminated as provided under Clause 12 of the Deed. 1.2 FUND TYPE / CATEGORY Growth /Equity 1.3 OBJECTIVE OF THE FUND The Fund seeks to achieve capital appreciation over the long term through investments in equities and equity-related instruments predominantly in Indonesia market. Note: Any material changes to the Fund s investment objective would require Unit Holders approval. 1.4 DISTRIBUTION POLICY Incidental 1.5 PERFORMANCE BENCHMARK The performance of the Fund is measured against the Jakarta Composite Index (JCI). 1.6 INVESTMENT STYLE AND STRATEGY The Fund seeks to achieve its investment objective by investing at least 80% of its NAV in a diversified portfolio of equities and equities-related securities issued by companies listed on the Indonesian market and other markets (mainly Singapore and Malaysia) whereby such companies in these countries derived at least 50% of their income from Indonesia as determined by the Fund Manager at the point of purchase. In the event the income derived from Indonesia from companies listed in other markets fall below 50%, the Fund Manager will assess if the investment rationale continues to meet their requirements and will dispose the investment if the investment rationale does not meet their requirements. The remaining NAV of the Fund will be invested in money market instruments and deposits. In addition, any active and frequent trading strategy will depend on investment opportunities or valuations. The investment process of the Fund employs both qualitative and quantitative analysis in identifying potential companies for investment. In identifying potential companies for investment, the Fund Manager adopts a bottom up approach which relies on fundamentals research the fundamentals are assessed from a broad range of criteria including the company s growth and value profile, its cash-flow generation ability and its management. During the six months financial period under review, the Fund remained guided by its investment objective to invest in the Indonesia market. 1

5 2 MANAGER S REPORT 2.1 FUND PERFORMANCE For the six months financial period ended 28 February 2018, the Fund s return increased by 2.07%. The Fund outperformed its benchmark return, JCI, which increased by 0.14%. The outperformance was broad based with stock selection and asset allocation decisions contributing positively to the outperformance. Stock selection in energy, healthcare, financials and consumer discretionary contributed to performance. The overweight in energy and materials in addition to the underweight in healthcare were also positive contributors. One of the Fund s long term investment in an oil and gas exploration company performed strongly as the Indonesian Trade Ministry issued a permit to the company for the export of copper concentrate. Early last year, the company s acquisition of gold and copper mines would be accretive and meaningfully speed up the turnaround of the company s profitability. As coal prices moved higher during the period, the Fund s exposure to coal exploration and coal infrastructure services companies were the primary sources of outperformance. Additionally, continuing to contribute was a paper company that is benefiting period from industry supply/demand imbalance that should see pricing continuing to increase. The Fund s underweight in an index heavyweight, which is a tobacco maker, was the leading contributor to the underperformance during the period. The Fund s investment in one of the country s telecom carriers underperformed due to concerns around elevated competition surrounding their mobile business which may lead to margin compression. However, their fixed businesses remain strong and we believe that concerns over a price war are overstated. 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% Aug 17 Fund Performance vs. Benchmark Index Return Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Manulife Investment Indonesia Equity Fund Return Benchmark Index Return Feb 18 Source: Lipper & Bloomberg Fund Size The Fund s total NAV decreased to RM16.96mil from RM21.64mil during the six months period under review. 2

6 Fund s Returns (a) The graph below compares the 5-year performance of the Fund against its benchmark return: 30% 20% 10% 0% -10% -20% -30% -40% -50% Feb 13 Jun 13 Fund Performance vs. Benchmark Index Return Oct 13 Feb Jun Source: Lipper & Bloomberg Oct 14 Feb Jun Oct 15 Feb Jun Oct 16 Feb Jun Oct Manulife Investment Indonesia Equity Fund Return Benchmark Index Return Feb 18 (b) Average Total Return of the Fund: For the interim period ended 28 February 2018 Fund (% p.a.) Benchmark (% p.a.) 1 year years years (5.69) 4.15 Commencement Date: 19 October 2010 Source: Lipper & Bloomberg (c) Annual Total Return of the Fund: For the interim period ended: Fund (% p.a.) Benchmark (% p.a.) 28 February February February 2016 (7.04) (1.28) 28 February 2015 (14.42) February 2014 (20.20) (14.98) Commencement Date: 19 October 2010 Source: Lipper & Bloomberg 3

7 BASES OF CALCULATION 1. Net Asset Value (NAV) Net Asset Value of the Fund is determined by deducting the value of all the Fund s liabilities from the value of all the Fund s assets, at the valuation point. 2. Net Asset Value per unit Net Asset Value per unit is the net asset value of the Fund divided by the total number of units in circulation, at the valuation point. 3. Fund s Return Fund s return can be calculated based on the computation methods as follows: Daily Total Fund s Return = {[End NAV (Ex-distribution) - Beginning NAV + Dividend Distribution] / Beginning NAV} x 100% Total Fund s Return Average Total Return = Total Fund s return for the period is derived from geometrically linking together the daily total fund s returns. The linking formula is = [(1+ R 1 ) x (1+ R 2 ) x (1+ R n )] -1 where: R 1 is the first daily return for the period, R 2 is the second daily return for the period, and R n is the last daily return for the period. = Annualised Total Return (Actual number of days in a year/ [(1+ Total fund s return for the period) number of days during the period) -1] x 100% The following table shows other financial and performance data of the Fund for the past three financial periods: Fund Data 28 February February February 2016 NAV (RM) 16,963,418 29,677,311 21,024,524 Units in Circulation ( 000) 84, , ,502 NAV per unit (RM) Highest / Lowest NAV per unit (RM) Total Fund Return (%) NAV Return (%) Income Return (%) / / / Management Expenses Ratio (%) Portfolio Turnover Ratio (times)

8 NOTES (i) Management Expenses Ratio (MER) MER can be calculated based on the ratio of the sum of fees and the recovered expenses of the unit trust fund to the average value of the unit trust fund calculated on a daily basis. Fees of the unit trust fund + Recovered expenses of the unit trust fund Average value of the unit trust fund calculated on a daily basis x 100 Where: Fees Recovered expenses Average value of the unit trust fund = All ongoing fees deducted / deductible directly from the unit trust fund in respect of the period covered by the management expense ratio, expressed as a fixed amount, calculated on a daily basis. This would include the annual management fee, the annual trustee fee and any other fees deducted / deductible directly from the unit trust fund; = All expenses recovered from/ charged to the unit trust fund, as a result of the expenses incurred by the operation of the unit trust fund, expressed as a fixed amount. This should not include expenses that would otherwise be incurred by an individual investor (e.g. brokerage, taxes and levies); and = The NAV of the unit trust fund, including unit trust net income value of the fund, less expenses on an accrued basis, in respect of the period covered by the management expense ratio, calculated on a daily basis. The MER for the financial period is higher than the previous financial period mainly due to the decrease in average fund size. (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 lower than the previous financial period mainly due to the decrease in average fund size. The Manager wishes to highlight that past performance of the Fund is not an indication of future performance. The price of units and the investment returns may go down, as well as up. 5

9 2.2 ASSET ALLOCATION Asset allocation of the Fund for the past three financial periods: Sector Allocation 28 February 2018 % of Net Asset Value 28 February February 2016 Financials Consumer Staples Energy Materials Telecommunication Services Consumer Discretionary Real Estate Industrials Utilities Health Care Total Quoted Investments Other Assets & Liabilities As at 28 February 2018, the Fund s largest weights are in financial and consumer staples as these are sectors in which we believe will be beneficiaries of the government s reform measures. The Fund has also increased its weighting in energy and materials given the strength in commodity prices. 2.3 MARKET REVIEW During the six months financial period under review (from 1st September 2017 to 28th February 2018), the local central bank cut policy rates twice as inflation remained on the lower end of its target and given stable financial conditions domestically. The financial regulator changed the rules on non-bank financial institutions investments to support the government s infrastructure projects. Indonesia government announced 2017 Q4 real gross domestic product (GDP) expansion of 5.19% year-on-year (y-o-y), which is above market s estimate of 5.12% as well as 3Q17 GDP at 5.06%. As expected, government expenditure remained solid, yet private consumption and gross fixed capital formation came out better than expected during the quarter. Overall, the overall real GDP growth is 5.07% y-o-y in FY17, higher than 5.03% in FY16. Consumer confidence reached an all-time high in December with month-on-month increases in economic conditions and consumer expectations. The central bank signalled the end of monetary policy easing citing a focus on inflation risks. Total direct investment rose 13% in FY17 with the government targeting 10% investment growth in 2018 and tourism being one of the key sectors. 6

10 2.4 MARKET OUTLOOK AND INVESTMENT STRATEGY MANULIFE INVESTMENT We are positive on the equity market in 2018 for several reasons: 1) Following the disappointing progress in H17, economic growth is now reviving, with domestic consumption expected to improve on the back of higher energy subsidies and the government s social assistance programme. GDP growth is estimated to improve in 2018; 2) 2018 is a pre-election year with 171 direct regional elections scheduled to take place across Indonesia. With the 3 most populous provinces all having gubernatorial elections in 2018, political campaign spending will provide support to consumption. Furthermore, we also expect political tensions to be less than that in 2017 and 3) potential interest rate cuts given the outlook for muted inflation. As the central bank continues to adopt an inflation targeting framework, lower inflation will create room for further policy easing. At this juncture, rising oil prices look to be the main spectre. We expect a better macro environment that will be favourable for investment. More coherent government and central bank policies should continue to facilitate growth in The first stage of the transformation process the removal of subsidies to facilitate more productive infrastructure spending is complete and Indonesia will now move to the second stage of the transformation through demand creation as private participation increases. The structural reforms initiated by President Jokowi s government finally prompted S&P to upgrade Indonesia to investment grade, putting Indonesia in a more favourable position. Political tensions eased as the gubernatorial election in Jakarta was conducted in peaceful fashion. There is a gradual recovery in household consumption in 2018 as the government has increased energy subsidies to keep inflation in check. In addition, there have also been increases in various healthcare and education subsidies, which will in turn help to increase disposable income, which is crucial to underpin more meaningful recovery in consumption. In 2018, the government will seek to shore up purchasing power with cash transfers for underprivileged groups and to rein in inflation for the middle class. Going forward, the Fund will add exposure to sectors and companies that will benefit from a recovery in the domestic economy, and companies with strong cash flows and robust balance sheets. Our investments are chosen on the basis of value, not popularity. Our portfolio represents good value in term of intrinsic business worth, and we expect satisfactory results from the portfolio over the long term. 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 ,001 to 10, , ,001 to 50, , ,001 to 500, , Above 500, , Manager s stock Total 1, ,

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 rebate 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 Indonesia Equity Fund ( the Fund ) for the six months financial period ended 28 February In our opinion and to the best of our knowledge, Manulife Asset Management Services Berhad ( the Manager ), has managed the Fund in accordance with the following:- a) Limitations imposed on the investment powers of the Manager and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) Valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and c) Creation and cancellation of units is carried out in accordance with the Deeds and any regulatory requirements. For and on behalf of RHB Trustees Berhad (Company No: U) LEE YIT CHENG Head, Group Int l Ops Support & Trustee Ops MOHD SOFIAN BIN KAMARUDDIN Vice President Kuala Lumpur, Malaysia 23 April

14 6 STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 28 FEBRUARY 2018 INVESTMENT INCOME Note Gross dividend income 74,964 61,850 Net gain on financial assets at fair value through profit or loss 6 608,733 1,578,250 Net foreign currency exchange loss (109,213) (121,667) RM RM 574,484 1,518,433 EXPENSES Manager s fee 3 174, ,315 Trustee s fee 4 9,000 11,747 Auditors remuneration 2,727 2,727 Tax agent s fee 1,339 1,339 Other expenses 57,486 59,174 Transaction costs 56,306 64, , ,198 PROFIT BEFORE TAXATION 273,075 1,114,235 TAXATION 5 (14,993) (12,370) PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME 258,082 1,101,865 Profit after taxation is made up as follows: Realised 775, ,009 Unrealised (517,735) 271, ,082 1,101,865 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 16,674,928 29,387,335 Amount due from stockbrokers 1,917,194 - Cash and cash equivalents 7 89,868 1,660,312 TOTAL ASSETS 18,681,990 31,047,647 LIABILITIES Amount due to Manager - Manager s fee 27,203 41,983 - Cancellation of units 1,680,998 1,297,080 Amount due to Trustee 3,000 3,366 Other payables 8 7,371 27,907 TOTAL LIABILITIES 1,718,572 1,370,336 NET ASSET VALUE ( NAV ) OF THE FUND 16,963,418 29,677,311 EQUITY Unit holders capital 12,149,799 25,901,776 Retained earnings 4,813,619 3,775,535 16,963,418 29,677,311 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 2 16,963,418 29,677,311 NUMBER OF UNITS IN CIRCULATION 9 84,092, ,232,000 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 ,083,897 4,555,537 21,639,434 Movement in unit holders contribution: Creation of units 7,278,043-7,278,043 Cancellation of units (12,212,141) - (12,212,141) Total comprehensive income - 258, ,082 BALANCE AS AT 28 FEBRUARY ,149,799 4,813,619 16,963,418 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 SEPTEMBER ,410,477 2,673,670 31,084,147 Movement in unit holders contribution: Creation of units 15,824,823-15,824,823 Cancellation of units (18,333,524) - (18,333,524) Total comprehensive income - 1,101,865 1,101,865 BALANCE AS AT 28 FEBRUARY ,901,776 3,775,535 29,677,311 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 (7,833,521) (9,094,156) Sale of investments 11,730,496 11,840,895 Net realised foreign exchange loss (63,882) (154,050) Dividends received 74,964 49,480 Manager s fee paid (181,858) (270,356) Trustee s fee paid (9,036) (10,515) Audit fee paid (5,830) (5,500) Tax agent s fee paid - (1,200) Payment for other fees and expenses (106,025) (60,366) Net cash generated from operating activities 3,605,308 2,294,232 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 7,278,043 15,954,813 Payments for cancellation of units (10,983,272) (17,460,456) Net cash used in financing activities (3,705,229) (1,505,643) Net (decrease)/increase in cash and cash equivalents (99,921) 788,589 Currency translation differences (45,331) 32,383 Cash and cash equivalents at the beginning of the financial period 235, ,340 Cash and cash equivalents at the end of the financial period 7 89,868 1,660,312 Cash and cash equivalents comprise: Bank balances in licensed banks 7 89,868 1,660,312 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 year beginning 1 March 2017: Amendments to MFRS 107 Statement of Cash Flows - Disclosure Initiatives (effective from 1 January 2017) introduce an additional disclosure in changes in liabilities arising from financing activities. The adoption of the Amendment to MFRS 107 has required additional disclosure of changes in liabilities arising from financing activities. Other than that, the adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. Financial year 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 stockbrokers, cash and cash equivalents in the statement of financial position. Other financial liabilities The Fund classifies amount due to Manager, amount due to Trustee and other payables as other financial liabilities. (ii) Recognition and initial measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Fund commits to purchase or sell the assets. 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. Loans and receivables are initially recognised at fair value plus transaction costs. 16

20 Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. (iii) Subsequent measurement - gains and losses Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are included in the profit or loss in the financial period which they arise. Loans and 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 is recognised 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 period 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 to Manager, amount due from stockbrokers, amount due to Trustee and other payables. The carrying values of the assets and liabilities are assumed to approximate their fair values due to the short tenure of less than one year. 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 period 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 Indonesia Equity Fund ( the Fund ) was established pursuant to a Master Deed dated 8 August 2008, as amended and supplemented by subsequent Supplemental Deeds (hereinafter referred to as the Deed ) between Manulife Asset Management Services Berhad ( the Manager ) and RHB Trustees Berhad ( the Trustee ). The principal activity of the Fund is to invest in "Authorised Investments" as defined under Clause 1 as mentioned in the seventh schedule of the Deed. The Fund commenced operations on 19 October 2010 and will continue its operations until terminated as provided under Clause 12 of the Deed. The main objective of the Fund is to achieve capital appreciation over the long term through investment in equities and equity-related intruments predominantly in Indonesia market. 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 1.80% per annum of the net asset value of the Fund before deducting Trustee s fee and Manager s fee for the day, calculated on a daily basis. There will be no further liability to the Manager in respect of Manager s fee other than the amount recognised above. 4 TRUSTEE'S FEE In accordance with the Deed, the Trustee is entitled to a fee of 0.08% per annum of the net asset value of the Fund before deducting Trustee s fee and Manager s fee for the day, calculated on a daily basis, subject to a minimum fee of RM18,000 per annum. There will be no further liability to the Trustee in respect of Trustee s fee other than the amount recognised above. 21

25 5 TAXATION RM RM Current taxation 14,993 12,370 Numerical reconciliation between profit before taxation multiplied by the Malaysian statutory tax rate and tax expenses of the Fund is as follows: RM RM Profit before taxation 273,075 1,114,235 Tax calculated at Malaysian tax rate of 24% (2017: 24%) 65, ,416 Tax effect in respect of: - Expenses not deductible for tax purposes 29,139 32,438 - Restriction on tax deductible expenses for unit trust funds 43,199 64,570 - Investment income not subject to tax (164,087) (393,624) - Investment income subject to different tax rate 14,993 12,370 - Effect of foreign tax on foreign taxable income 26,211 29,200 Tax expenses 14,993 12,370 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS RM RM Designated at fair value through profit or loss - Foreign quoted investments 16,674,928 29,387,335 Net gain on financial assets at fair value through profit or loss Realised 1,081,137 1,338,779 - Unrealised (472,404) 239,471 RM RM 608,733 1,578,250 22

26 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED INVESTMENTS Quantity INDONESIA MATERIALS Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Barito Pacific Tbk PT 668, , , Indah Kiat Pulp & Paper Tbk PT 211, , , Indopoly Swakarsa Industry Tbk PT 3,219, , , Petrosea Tbk PT 227, , , Semen Indonesia Persero Tbk PT 64, , , Vale Indonesia Tbk PT 418, , , ,809,500 1,720,679 2,043, CONSUMER DISCRETIONARY Astra International Tbk PT 215, , , Selamat Sempurna Tbk PT 921, , , ,137, , , CONSUMER STAPLES Gudang Garam Tbk PT 29, , , HM Sampoerna Tbk PT 467, , , Indofood Sukses Makmur Tbk PT 156, , , Japfa Comfeed Indonesia Tbk PT 392, , , Mayora Indah Tbk PT 636, , , Perusahaan Perkebunan London Sumatra Indonesia Tbk PT 416, , , Unilever Indonesia Tbk PT 74, ,378 1,139, ,173,000 3,292,231 3,567, ENERGY Indo Tambangraya Megah Tbk PT 36, , , Indika Energy Tbk PT 544, , , Medco Energi International Tbk PT 1,233, , , United Tractors Tbk PT 63, , , ,877,900 1,607,654 2,183,

27 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED INVESTMENTS Quantity FINANCE Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Bank Central Asia Tbk PT 231,900 1,109,544 1,531, Bank Cimb Niaga Tbk PT 531, , , Bank Mandiri Persero Tbk PT 318, , , Bank Negara Indonesia Persero Tbk PT 222, , , Bank Panin Indonesia Tbk PT 464, , , Bank Rakyat Indonesia Persero Tbk PT 1,165, ,899 1,255, Bank Tabungan Negara Persero Tbk PT 356, , , Panin Financial Tbk PT 4,490, , , ,780,700 4,069,923 5,270, HEALTHCARE Mitra Keluarga Karyasehat Tbk PT 356, , , INDUSTRIALS PRODUCT Jasa Armada Indonesia Tbk PT 1,206, , , Total Bangun Persada Tbk PT 426, ,643 88, Wijaya Karya Persero Tbk PT 532, , , ,165, , , REAL ESTATE Ciputra Development Tbk PT 1,418, , , Pakuwon Jati Tbk PT 455,900 93,353 87, ,874, , , TELECOMMUNICATIONS Telekomunikasi Tbk PT 976,300 1,039,164 1,112, UTILITIES Perusahaan Gas Negara Persero Tbk PT 387, , ,

28 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED INVESTMENTS Quantity Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % TOTAL QUOTED INVESTMENTS - FOREIGN 23,538,092 14,324,896 16,674, ACCUMULATED UNREALISED GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 2,350,032 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 16,674,928 QUOTED INVESTMENTS Quantity INDONESIA CONSUMER DISCRETIONARY Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % Astra International Tbk PT 683,800 1,639,743 1,866, Selamat Sempurna Tbk PT 888, , , Ace Hardware Indonesia Tbk PT 1,316, , , Matahari Department Store Tbk PT 122, , , Ramayana Lestari Sentosa Tbk PT 827, , , ,838,000 3,222,088 3,409,

29 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED INVESTMENTS Quantity Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % CONSUMER STAPLES Astra Agro Lestari Tbk PT 104, , , Gudang Garam Tbk PT 49, ,385 1,084, HM Sampoerna Tbk PT 1,230,300 1,451,755 1,584, Indofood CBP Sukses Makmur Tbk PT 97, , , Indofood Sukses Makmur Tbk PT 368, , , Industri Jamu Dan Farmasi Sido Muncul Tbk PT 2,269, , , Nippon Indosari Corpindo Tbk PT 948, , , Perusahaan Perkebunan London Sumatra Indonesia Tbk PT 643, , , Sawit Sumbermas Sarana Tbk PT 656, , , Unilever Indonesia Tbk PT 155,100 1,854,066 2,176, Tunas Baru Lampung Tbk PT 484, , , ,007,400 7,501,522 8,397, ENERGY Indo Tambangraya Megah Tbk PT 95, , , Medco Energi International Tbk PT 673, , , Surya Esa Perkasa Tbk PT 85,000 36,735 53, , ,609 1,173, FINANCE Bank Central Asia Tbk PT 456,400 1,908,413 2,346, Bank Mandiri Persero Tbk PT 302, ,745 1,138, Bank Negara Indonesia Persero Tbk PT 476, , , Bank Rakyat Indonesia Persero Tbk PT 277, ,213 1,105, Bank Tabungan Negara Persero Tbk PT 1,077, , , Panin Financial Tbk PT 6,097, , , Bank Pan Indonesia Tbk PT 1,520, , , ,208,300 5,861,886 7,219, HEALTHCARE Mitra Keluarga Karyasehat Tbk PT 858, , ,

30 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) QUOTED INVESTMENTS Quantity Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % INDUSTRIALS PRODUCT Acset Indonusa Tbk PT 326, , , KMI Wire & Cable Tbk Pt 2,282, , , Pembangunan Perumahan Tbk PT 490, , , Total Bangun Persada Tbk PT 2,101, , , Wijaya Karya Persero Tbk PT 640, , , ,841,339 2,161,663 2,262, MATERIALS Aneka Tambang Persero Tbk PT 1,779, , , Petrosea Tbk PT 862, , , Indocement Tunggal Prakarsa 56, , , Wijaya Karya Beton Tbk PT 1,393, , , ,091,442 1,281,708 1,356, REAL ESTATE Ciputra Development Tbk PT 3,162,609 1,276,411 1,441, Puradelta Lestari Tbk PT 5,096, , , Lippo Karawaci Tbk PT 1,388, , , ,646,709 2,037,478 2,191, TELECOMMUNICATIONS Telekomunikasi Tbk PT 1,906,300 1,898,326 2,442, UTILITIES Perusahaan Gas Negara Persero Tbk PT 216, , , TOTAL QUOTED INVESTMENTS - FOREIGN 44,467,890 25,760,614 29,387, ACCUMULATED UNREALISED GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 3,626,721 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 29,387,335 27

31 7 CASH AND CASH EQUIVALENTS RM RM Bank balances in licensed banks 89,868 1,660,312 8 OTHER PAYABLES RM RM Auditors remuneration 2,397 2,837 Tax agent s fee 2,839 2,839 Sundry payables and accruals 2,135 22,231 7,371 27,907 9 UNITS IN CIRCULATION No. of units No. of units At beginning of the financial period 109,502, ,372,000 Add: Creation of units 35,800,000 83,470,000 Less: Cancellation of units (61,210,000) (96,610,000) At end of the financial period 84,092, ,232, BROKERS AND FINANCIAL INSTITUITIONS TRANSACTIONS The details of transactions with 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 Credit Suisse (HK) Limited 8,847, , J.P. Morgan Securities (Asia Pacific) Limited 6,090, , Deusec - HK 4,995, , UBS Securities Asia Limited 1,347, , ,280, , For the financial period ended 28 February 2018, details of transaction with brokers by value of trades apply only to equities and fixed income securities. This took effect from 24 May 2017 as per Securities Commission's Guidelines on Unit Trust Funds. 28