1 General Information 1. 2 Manager s Report 3. 3 Policy On Stockbroking Rebates And Soft Commissions 9. 4 Statement By The Manager 10

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2 CONTENTS PAGE 1 General Information 1 2 Manager s Report 3 3 Policy On Stockbroking Rebates And Soft Commissions 9 4 Statement By The Manager 10 5 Trustee s Report 11 6 Independent Auditors Report 12 7 Statement Of Comprehensive Income 15 8 Statement Of Financial Position 16 9 Statement Of Changes In Equity Statement Of Cash Flows Summary Of Significant Accounting Policies Notes To The Financial Statements Corporate Information 42 i

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4 MANULIFE INVESTMENT- 1 GENERAL INFORMATION 1.1 THE TRUST The Fund commenced operations on 23 January 2007 and will continue its operations until terminated as provided under Clause 48.2 of the Deed. 1.2 FUND TYPE / CATEGORY Growth / Mixed Assets 1.3 OBJECTIVE OF THE FUND To provide Unit Holders with long-term capital appreciation. Note: Any material changes to the Fund s investment objective would require Unit Holders approval. 1.4 DISTRIBUTION POLICY Incidental 1.5 PERFORMANCE BENCHMARK The performance of the Fund is measured against the Manulife Investment-CMFlexi Index (MFI), comprising 50% FTSE Bursa Malaysia Top 100 Index (FBM100) + 50% CIMB 12-month Fixed Deposit (FD) Rate. As the Fund adopts an active and frequent trading strategy with equity exposure range from 0% to 98% of the Fund s NAV, the benchmark chosen for the Fund is a composite benchmark index comprising a hypothetical investment in the FBM100 and CIMB 12-month FD rate in a ratio of 50:50. Therefore, the returns for the benchmark index for any given period of time would comprise of 50% from the return of the FBM100 and 50% from the CIMB 12-month FD rate interest earned for the same period of time. The FBM100 index is selected as the Fund s equity benchmark as it is more representative of the local market that the Fund invests in. This composite benchmark of 50% in FBM100 and 50% in CIMB 12-month FD rate represents an appropriate performance benchmark for the Fund as it is reflective of the Fund s asset allocation which will typically be a mix of equities and fixed income over the medium- to long-term. The risk profile of the Fund is different from the risk profile of the benchmark. 1.6 INVESTMENT STYLE AND STRATEGY The Fund invests in a diversified portfolio of equities and equity-related instruments. For defensive consideration, it will invest in a mix of equities, debentures and money market instruments depending on the short-term and long-term market outlook. The Fund may invest up to 98% in equities and equity-related instruments. However, the Fund may turn totally defensive and invest in only fixed income and money market instruments should the Fund Manager foresee a bearish equity market. This allows the Fund the flexibility to switch to equities when the stock market is bullish and to fixed income and money market instruments when the stock market is bearish. At any one time, the asset mix may also comprise all asset classes. 1

5 Strategy on equity investment broadly consists of the following: (i) The portfolio s asset allocation is determined by the Fund Manager s macro view. A bottom-up approach in the stock selection will then follow in determining exposure to certain sector(s) or theme(s). This process will include: a) Identification of growth companies which have competitive advantages to support strong earnings prospects; and b) Screening for value which identifies fundamentally sound companies whose stock prices have yet to reflect such value. These would include those with attractive valuations relative to their industry peers and those trading at significant discounts to their intrinsic/book or replacement values. Focus will also be put on laggards and oversold stocks which have the potential to rebound. (ii) In addition to the quantitative factors included above, qualitative factors such as management and corporate governance will also be considered. Strategy on fixed income and money market investment: (i) (ii) (iii) Predominantly in short-term fixed income and money market instruments. These are typically deposits and fixed income securities. For investment in bonds, the Fund Manager takes a top-down approach for asset allocation and a bottom-up approach for bond selection; looking for bonds with value, investing in bonds after thorough credit evaluation and identifying the Relative Market Value. The short-term nature of fixed income and money market instruments allows the Fund Manager to easily switch to equities during conducive stock market or bullish periods. The Fund may invest in Asia-Pacific markets, namely China, Hong Kong, Indonesia, South Korea, the Philippines, Singapore, Taiwan and Thailand. During the financial year under review, the average total return of the Fund increased by 13.71%, outperforming its benchmark return, MIFI, by 8.63% over the same period. The Fund s total NAV increased to RM39.2 mil from RM36.5 mil. As at 31 March 2018, the Fund was 84.36% invested in equities. 2

6 2 MANAGER S REPORT 2.1 FUND PERFORMANCE For the financial year ended 31 March 2018, the average total return of the Fund increased by 13.71%. The Fund outperformed its benchmark return, MFI, which increased by 5.08%. The outperformance was due to better performance, driven by favourable stock selection within the Industrials, Oil & Gas and Consumer Goods sectors. The distribution of 1.70 sen per unit on 28 March 2018 had the effect of reducing the NAV per unit of the Fund, and ex-distribution NAV per unit was RM The graph below compares the 12-month performance of the Fund against its benchmark return: 16% 14% 12% 10% 8% 6% 4% -2% 0% 2% Apr 17 May 17 Fund Performance vs. Benchmark Index Return Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Manulife Investment-CM Flexi Fund Return Source: Bloomberg L.P. Fund Size Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Benchmark Index Return The Fund s total NAV increased to RM39.22mil from RM36.51mil during the financial year under review. Fund s Returns a) The graph below compares the 5-Year performance of the Fund against its benchmark return: 60% 50% 40% 30% 20% 10% 0% Mar 13 Jul 13 Nov 13 Fund Performance vs. Benchmark Index Return Mar Jul Nov 14 Mar Jul Nov 15 Manulife Investment-CM Flexi Fund Return Source: Bloomberg L.P. Mar Jul Nov 16 Mar Jul Nov 17 Mar 18 Benchmark Index Return 3

7 (b) Average Total Return of the Fund: For the financial year ended 31 March 2018 Fund (% p.a.) MFI (% p.a.) 1 year years years Commencement date: 23 January 2007 Source: Bloomberg L.P. (c) Annual Total Return of the Fund: For the financial year ended: Fund (% p.a.) MFI (% p.a.) 31 March March March 2016 (3.36) (0.89) 31 March 2015 (10.36) March Commencement date: 23 January 2007 Source: Bloomberg L.P. The Fund has achieved its target of providing Unit Holders with long-term capital appreciation. BASES OF CALCULATION 1. Net Asset Value (NAV) Net Asset Value of the Fund is determined by deducting the value of all the Fund s liabilities from the value of all the Fund s assets, at the valuation point. 2. Net Asset Value per unit Net Asset Value per unit is the net asset value of the Fund divided by the total number of units in circulation, at the valuation point. 3. Fund s Return The total Fund s return comprises both NAV return and income return. The returns can be calculated based on the computation methods as follows: Total Fund s Return = [(NAV Return*Series of Income Return) 1] x 100% NAV Return = {[End NAV (Ex-distribution)/Beginning NAV]-1} x 100% Income Return = (Gross Distribution / Ex-NAV price) x 100% Average Total Return = (NAV Return*Series of Income Return) (365.25/n) x , where n = number of days between beginning and end dates. 4

8 The following table shows other financial and performance data of the Fund for the past three financial years: Fund Data 31 March March March 2016 NAV (RM) 39,222,770 36,508,733 39,202,627 Units in Circulation ( 000) 167, , ,920 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 / / / (3.36) (9.66) 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 year remains consistent with the previous financial year. 5

9 (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 year is lower than the previous financial year mainly due to the decrease in trading activities. Impact on NAV Arising From Distribution Distributed For The Past Three Financial Years: Details 28 March 2018 Cum date 28 March March 2016 NAV before distribution (RM per unit) Less: Distribution (RM per unit) (0.0170) (0.0145) (0.0140) 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 years: Sector Allocation 31 March March March 2016 Trading/Services Finance Industrial Products Consumer Products Technology Construction Properties Plantation Infrastructure Project Companies Quoted Investments Local Quoted Investments Foreign Total Quoted Investments Deposits with Licensed Financial Institutions Other Assets & Liabilities (8.26) 6

10 Country Allocation MANULIFE INVESTMENT- 31 March 2018 % of Net Asset Value 31 March March 2016 Malaysia Indonesia Total Quoted Investments As at 31 March 2018, the Fund was 84.36% invested in equities, down from 89.51% a year ago. The Fund s equity allocation was lowered on the back of rising concerns of escalating US-China trade disputes. 2.3 MARKET REVIEW During the financial year under review (1st April 2017 to 31st March 2018), the FTSE Bursa Malaysia Top 100 (Index) rose by 7.0% from 12, points to 12, points. The Index rose 2.1% in April 2017, driven by inflows from foreign funds. The Ringgit (MYR) strengthened 1.9% against the US Dollar from to during the month. Governmentlinked companies (GLCs) restructuring was a key theme as UMW and Sime Darby led gainers for the consumer discretionary and industrial sectors. The Index s performance was rather flat from May to October 2017, rising only 0.2% over the period. The key highlight during the period was the listing of Lotte Chemical Titan (Lotte) in July, the largest initial public offering since The stock fell at debut due to weak investor demand and suffered another sharp drop after it announced a 72% decline in its second quarter net profit. Malaysia released its 1Q17 and 2Q17 Gross Domestic Product (GDP) during the period under review. GDP growth was 5.6% and 5.8% in 1Q17 and 2Q17, respectively, underpinning Malaysia s strong macroeconomic fundamentals. This led to various economists upgrading their full year GDP forecast for Malaysia to 5.2%-5.5% (government estimate 4.3%-4.8%). On the policy front, Bank Negara Malaysia kept the Overnight Policy Rate unchanged at 3.00% during its monetary policy meeting in September. Budget 2018 was tabled on 27 October and was regarded as both expansionary and people-centric. Fiscal discipline was maintained as shown by a smaller deficit target of 2.8% for 2018 from 3.0% this year. In November 2017, the Index fell points or 1.33% to 12, pts. The 3Q17 result season failed to re-rate the market. In addition to this, the Sime demerger exercise failed to lift sentiments in the market. But the Index bounced back 4.5% to close the year at 12, pts on the back of window-dressing activities, driven by banking and technology stocks. January 2018 was a strong month as the Index jumped 3.6% on the back of a stronger MYR, higher oil prices, net foreign inflows, hike in overnight policy rate and overall stronger economy. In January, foreign investors were net buyers of RM3.4 billion vs RM10.3 billion in the whole of Brent crude oil price closed at USD69.05/barrel, while the MYR appreciated 3.8% to close at However, February was a volatile month as investors began re-pricing more interest rate hikes in the United States, earlier than expected, on the back of higher inflation expectations. In line with the global rout, the Index corrected pts or 1.1% to 12, pts. The Index had fallen sharply from a high of 13,071.7 pts (February 2) to a low of 12,642.0 (February 6), before recouping most of its losses by month end. March was a negative month as the Index shed 73.7 pts or 0.6% to 12,849.0 pts on the back of rising concerns of escalating US-China trade disputes. Large caps continued to outperform the broader market and small caps. For the first quarter of 2018, the FBM100 rose 1.9%, supported by net foreign inflows of RM2.2 billion. 7

11 2.4 MARKET OUTLOOK AND INVESTMENT STRATEGY At the time of writing in early April, mounting US-China trade tensions have unnerved equity markets as evidenced by the global selldown. In our opinion, a full-blown trade war will be avoided as it is detrimental to all. Instead, we expect resolution via bilateral negotiations and dialogue on strategic economic sectors. Locally, the 14th General Elections (GE14) will be held on May 9. Our base case is for no major political changes following GE14, and for the market to re-focus on earnings delivery and policy continuity, amid a mainly externally-driven volatile macro environment. However, until we get a firm resolution on the US-China trade war and the final outcome of the GE14, volatility in the equity markets is expected to remain high. Nevertheless, we remain constructive on Malaysian equities and will look to selectively add to our preferred stocks opportunistically in market corrections. We will stay invested, and continue to prefer large caps to small caps, and to maintain portfolio liquidity. We continue to like Financials, Tourism and Industrials. We will also re-look at sectors which have retraced substantially. 2.5 BREAKDOWN OF UNIT HOLDINGS BY SIZE AS AT 31 MARCH 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 50,000 1, , ,001 to 500, , Above 500, , Manager s stock Total 2, ,

12 3 POLICY ON STOCKBROKING REBATES AND SOFT COMMISSIONS The Management Company did not retain any rebates. Goods and services (soft commissions) may be retained by the Manager or its delegates if the goods and services are of demonstrable benefit to unit holders, and dealings with the broker/dealer are executed on terms which are the best available to the Fund. The Manager and its delegates have subscribed but are not limited to the following goods and services which are demonstrably beneficial to unit holders such as Bloomberg, Reuters, Bondweb, Factsheet and Lipper. 9

13 4 STATEMENT BY THE MANAGER We, Edmond Cheah Swee Leng and Chong Soon Min, being two of the Directors of Manulife Asset Management Services Berhad (the Manager ), do hereby state that, in the opinion of the Manager, the accompanying financial statements comprising the statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, summary of significant accounting policies and notes to the financial statements, are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the financial position of the Fund as at 31 March 2018 and of its financial performance, changes in equity and cash flows of the Fund for the financial year ended 31 March 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 25 May

14 5 TRUSTEE S REPORT TO THE UNIT HOLDERS OF MANULIFE INVESTMENT- We have acted as Trustee of Manulife Investment-CM Flexi Fund ( the Fund ) for the financial year ended 31 March To the best of our knowledge, Manulife Asset Management Services Berhad ( the Manager ) has managed the Fund in the financial year under review in accordance with the following: 1. Limitations imposed on the investment powers of the Manager under the deeds, securities laws and these Guidelines; 2. Valuation or pricing of the Fund are carried out in accordance with the deeds and any regulatory requirements; and 3. Creation and cancellation of units are carried out in accordance with the deeds and any regulatory requirements. An income distribution of 1.70 sen per unit (gross) to the unit holders of the Fund for the financial year under review. We are the view that the distribution is consistent with the investment objective and distribution policy of the Fund. For Maybank Trustees Berhad (Company No.: 5004-P) BERNICE K M LAU Head,Operations Kuala Lumpur 25 May

15 6 INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF MANULIFE INVESTMENT- REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Our opinion In our opinion, the financial statements of Manulife Investment-CM Flexi Fund ( the Fund ) give a true and fair view of the financial position of the Fund as at 31 March 2018, and of its financial performance and its cash flows for the year then ended in accordance with the Malaysian Financial Reporting Standards and International Financial Reporting Standards. What we have audited We have audited the financial statements of the Fund which comprise the statement of financial position as at 31 March 2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 15 to 41. Basis for opinion We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence and other ethical responsibilities We are independent of the Fund in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants ( By-Laws ) and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code. Information other than the financial statements and auditors report thereon The Manager of the Fund is responsible for the other information. The other information comprises Manager s report but does not include the financial statements of the Fund and our auditors report thereon. Our opinion on the financial statements of the Fund does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements of the Fund, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Fund or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 12

16 Responsibilities of the Manager for the financial statements MANULIFE INVESTMENT- The Manager of the Fund is responsible for the preparation of the financial statements of the Fund that give a true and fair view in accordance with Malaysian Financial Reporting Standards and International Financial Reporting Standards. The Manager is also responsible for such internal control as the Manager determines is necessary to enable the preparation of financial statements of the Fund that are free from material misstatement, whether due to fraud or error. In preparing the financial statements of the Fund, the Manager is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to liquidate the Fund or has no realistic alternative but to do so. Auditors responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements of the Fund as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: (a) Identify and assess the risks of material misstatement of the financial statements of the Fund, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. (c ) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. (d) (e) Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements of the Fund or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements of the Fund, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 13

17 OTHER MATTERS This report is made solely to the unit holders of the Fund and for no other purpose. We do not assume responsibility to any other person for the content of this report PRICEWATERHOUSECOOPERS PLT (No. LLP & AF 1146) Chartered Accountants Kuala Lumpur 25 May

18 7 STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018 INVESTMENT INCOME Note Interest income 99, ,108 Gross dividend income 1,017, ,664 Net gain on financial assets at fair value through profit or loss 6 4,276,556 2,342,133 RM RM 5,393,265 3,455,905 EXPENSES Manager s fee 3 536, ,722 Trustee s fee 4 28,637 28,519 Auditors remuneration 5,500 5,610 Tax agent s fee 2,700 14,700 Other expenses 83,062 83,360 Transaction costs 294, , ,670 1,049,717 PROFIT BEFORE TAXATION 4,441,595 2,406,188 TAXATION 5 - (18,622) PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME 4,441,595 2,387,566 Profit after taxation is made up as follows: Realised 3,379,976 1,138,222 Unrealised 1,061,619 1,249,344 4,441,595 2,387,566 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 15

19 8 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018 ASSETS Note RM RM Financial assets at fair value through profit or loss 6 33,099,688 32,688,584 Amount due from Manager 2,741,550 2,274,024 Amount due from stockbrokers 51,132 1,025,782 Dividends receivable 65,051 48,407 Tax recoverable 55,078 55,078 Cash and cash equivalents 7 6,305,120 3,547,490 TOTAL ASSETS 42,317,619 39,639,365 LIABILITIES Amount due to Manager - Manager s fee 50,831 44,450 - Cancellation of units 333,876 79,932 Amount due to Trustee 2,711 2,371 Amount due to stockbrokers - 677,387 Other payables 8 51,181 79,717 Distribution payable 2,656,250 2,246,775 TOTAL LIABILITIES 3,094,849 3,130,632 NET ASSET VALUE ( NAV ) OF THE FUND 39,222,770 36,508,733 EQUITY Unit holders capital 33,573,147 34,503,830 Retained earnings 5,649,623 2,004,903 39,222,770 36,508,733 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 2 39,222,770 36,508,733 NUMBER OF UNITS IN CIRCULATION 9 167,380, ,230,000 NAV PER UNIT The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 16

20 9 STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018 MANULIFE INVESTMENT- Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 APRIL ,503,830 2,004,903 36,508,733 Movement in unit holders contribution: Creation of units arising from applications 28,349,071-28,349,071 Creation of units arising from distribution 2,656,250-2,656,250 Cancellation of units (30,076,629) - (30,076,629) Total comprehensive income - 4,441,595 4,441,595 Distribution (Note 15) (1,859,375) (796,875) (2,656,250) BALANCE AS AT 31 MARCH ,573,147 5,649,623 39,222,770 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 APRIL ,645, ,988 39,202,627 Movement in unit holders contribution: Creation of units arising from applications 3,760,871-3,760,871 Creation of units arising from distribution 2,246,775-2,246,775 Cancellation of units (8,842,331) - (8,842,331) Total comprehensive income - 2,387,566 2,387,566 Distribution (Note 15) (1,307,124) (939,651) (2,246,775) BALANCE AS AT 31 MARCH ,503,830 2,004,903 36,508,733 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 17

21 10 STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018 CASH FLOWS FROM OPERATING ACTIVITIES Note Purchase of investments (42,488,330) (61,871,888) Sale of investments 46,356,215 57,089,577 Dividends received 1,000, ,551 Interest income received 99, ,108 Manager s fee paid (530,561) (539,881) Trustee s fee paid (28,297) (29,049) Audit fee paid (5,940) (5,500) Tax agent s fee paid (7,893) (8,099) Payment for other fees and expenses (105,964) (64,296) Net cash generated from/(used in) operating activities 4,289,295 (4,341,477) RM RM CASH FLOWS FROM FINANCING ACTIVITIES Distribution paid (2,246,775) (2,348,780) Proceeds from creation of units 30,537,795 6,216,128 Payments for cancellation of units (29,822,685) (8,762,399) Net cash used in financing activities (1,531,665) (4,895,051) Net increase/(decrease) in cash and cash equivalents 2,757,630 (9,236,528) Cash and cash equivalents at the beginning of the financial year 3,547,490 12,784,018 Cash and cash equivalents at the end of the financial year 7 6,305,120 3,547,490 Cash and cash equivalents comprise: Deposit with licensed financial institution 7 5,865,340 3,494,986 Bank balances in a licensed bank 439,780 52,504 6,305,120 3,547,490 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 18

22 11 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE FINANCIAL YEAR ENDED 31 MARCH 2018 The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements. The policies have been consistently applied to all the financial years presented, unless otherwise stated. A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements of the Fund have been prepared in accordance with the Malaysian Financial Reporting Standards ( MFRS ) and the International Financial Reporting Standards ( IFRS ). The financial statements have been prepared under the historical cost convention, as modified by financial assets at fair value through profit or loss. The preparation of financial statements in conformity with MFRS and IFRS requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. It also requires the 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 financial year ended 31 March The Fund has applied the following amendments for the first time for the financial year beginning 1 January 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 these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. The Fund will apply this standard when effective. This standard is not expected to have a significant impact on the Fund s financial statements. Financial year beginning on/after 1 April 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. 19

23 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 has reviewed its financial assets and liabilities and has assessed the following impacts from the adoption of the new standard as below: There will be no impact on the Fund s accounting for financial assets as the Fund s equity investments currently measured at fair value through profit or loss will continue to be measured on the same basis under MFRS 9. There will be no impact on the Fund s accounting for financial liabilities as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Fund does not have any such liabilities. The new impairment model requires the recognition of impairment provisions based on ECL rather than only incurred credit losses as is the case under MFRS 139. It applies to financial assets classified at amortised cost. Based on the assesments undertaken to date, the Fund does not expect any loss allowance to be recognised upon adoption of MFRS 9. 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, amount due from stockbrokers, dividends receivable, 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. 20

24 (ii) Recognition and initial measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Fund commits to purchase or sell the assets. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in profit or loss. Receivables are initially recognised at fair value plus transaction costs. Financial liabilities, within the scope of MFRS 139, are recognised in the statement of financial position when, and only when, the Fund becomes a party to the contractual provisions of the financial instrument. (iii) Subsequent measurement - gains and losses Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are included in the profit or loss in the 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. 21

25 C CREATION AND CANCELLATION OF UNITS The Fund issues cancellable units, which are cancelled at the unit holder s option and are classified as equity. Cancellable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s net asset value. The outstanding unit is carried at the redemption amount that is payable at the date of the statement of financial position if the unit holder exercises the right to put the unit back to the Fund. Units are created and cancelled at the unit holder s option at prices based on the Fund s net asset value per unit at the time of creation and cancellation. The Fund s net asset value is calculated by dividing the net assets attributable to unit holders with the total number of outstanding units. The net asset value per unit is computed each dealing day. The price at which units are created or cancelled is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day. Units in the Fund are classified as equity in the statement of financial position and are stated at fair value representing the price at which unit holders can redeem the units from the Fund. D INCOME RECOGNITION Interest income from deposits placed with licensed financial instituitions 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. 22

26 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. 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 DISTRIBUTION A distribution to the Fund s unit holders is accounted for as a deduction from realised reserve. A proposed distribution to unit holders is recognised in the statement of changes in equity upon approval by the Trustee. Distribution equalisation is the amount attributable to net realised income that is included in the price of units created or units cancelled by the Fund during the reporting period. I FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and the measurement date. The information presented herein represents the estimates of fair 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. 23

27 (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 from/to stockbrokers, dividends receivable, 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. 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. 24

28 12 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 MARCH INFORMATION ON THE FUND Manulife Investment-CM Flexi Fund ( the Fund ) was established pursuant to a Master Deed date 31 January 2002, as amended and supplemented by subsequent Supplemental Deeds (hereinafter referred to as the Deed ) between Manulife Asset Management Services Berhad ( the Manager ) and Maybank Trustees 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 23 January 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. 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 25 May 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 1.50% 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. 25