1 General Information 1. 2 Manager s Report 3. 3 Policy On Stockbroking Rebates And Soft Commissions Statement By The Manager 11

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2 CONTENTS PAGE 1 General Information 1 2 Manager s Report 3 3 Policy On Stockbroking Rebates And Soft Commissions 10 4 Statement By The Manager 11 5 Trustee s Report 12 6 Statement Of Comprehensive Income 13 7 Statement Of Financial Position 14 8 Statement Of Changes In Equity 15 9 Statement Of Cash Flows Summary Of Significant Accounting Policies Notes To The Financial Statements Corporate Information 33 i

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4 MANULIFE 1 GENERAL INFORMATION 1.1 THE TRUST The Fund commenced operations on 7 January 2010 and will continue its operations until terminated as provided under Clause 12 of the Deed. Note: For fund performance purposed, the commencement date of the RM Class starts from 20 April 2015, while the commencement date of the USD class starts from 21 March 2018 and 23 March 2018 (when the first subsrciption was made). 1.2 FUND TYPE / CATEGORY Growth / Feeder Fund 1.3 OBJECTIVE OF THE FUND The Fund which aims to achieve long term capital growth through investment, primarily* in under-valued companies with long term potential and substantial business interest in the Greater China Region (which includes PRC, Hong Kong and Taiwan) which are listed or traded on stock exchanges of Shanghai, Shenzhen, Hong Kong, Taipei or other exchanges. *primarily means mainly 70% invested 1.4 DISTRIBUTION POLICY The Fund intends to distribute income, if any, on an annual basis. 1.5 PERFORMANCE BENCHMARK The benchmark for the Fund is the FTSE All World Greater China Index. Investors may refer to Bloomberg and/or the Manager for the performance of this benchmark. *primarily means mainly 70% invested Note: Any material changes to the Fund s investment objective would require Unit Holders approval. 1.6 INVESTMENT STYLE AND STRATEGY The Fund will invest principally in MGF-CVF Share Class A which initially managed by Investment Manager-Value Partners Limited (VP) and effective from 17 November 2017 the Fund is managed by Manulife Asset Management (Hong Kong) Limited. MGF-CVF is collective investment scheme constituted in Luxembourg. MGF-CVF was established on 1 April This Fund is a feeder fund that invests at least 95% of its NAV in MGF-CVF. The risk management strategies and techniques employed will be at the MGF-CVF level initially by Investment Manager- Valye Partnetd Limited (AP) and effective from 17 November 2017 the Fund is managed by Manulife Asset Management (Hong Kong) Limited. with its investment strategy that involves diversification among its asset allocation to invest in undervalued stocks or companies in China market. 1

5 Although the Fund is passively managed, the investments of the Fund will be rebalanced from time to time to meet redemptions and to enable the proper and efficient management of the Fund. Specific risks associated with such securities and investments. Notwithstanding the above, the Manager may, in consultation with the Trustee and with the Unit Holder s approval, replace MGF-CVF with another fund of a similar objective if, in the Manager s opinion, MGF-CVF no longer meets this Fund s investment objective, or when acting in the interest of the Unit Holders. In all circumstances the MICVF will continue investing at least 95% of its NAV in MGF-CVF as such the performance of MGF-CVF will reflect on the MICVF s performance. 2

6 2 MANAGER S REPORT During the six-months financial period under review, there have been no significant change in the state of the affairs of the fund and there have been no circumstances that materially affect any interest of the unit holders. 2.1 FUND PERFORMANCE For the six-months financial period ended 30 April 2018, the Target Fund s return increased by 2.11%. For reference, the FTSE All World Greater China Index was up by 4.28% over the same period, both in USD terms. During the period under review, stock selection in China added value while stock selection in Hong Kong and Taiwan dragged performance. At the sector level, stock selection in information technology was the notable detractor. On the positive side, stock selection in utilities and consumer staples, as well as an overweight in healthcare, helped performance. For the six-month financial period ended 30 April 2018, the Fund s return decreased by 5.62%, which underperformed its benchmark s return of -3.79%, after factoring in the depreciation of the USD against MYR, The graph below compares the 6-month performance of the Fund against its benchmark return: 4% 2% 0% -2% -4% -6% -8% Oct 17 Fund Performance vs. Benchmark Index Return Nov 17 Dec 17 Jan 18 Manulife China Equity Fund Return Source: Lipper & Bloomberg L.P. Fund Size Feb 18 Mar 18 Benchmark Index Return The Fund s total NAV increased to RM105.67mil from RM60.82mil during the six-month period under review. Fund s Returns Apr 18 (a) The graph below compares the 5-year performance of the Fund against its benchmark return: 100% 80% 60% 40% 20% 0% -20% Apr 13 Aug 13 Fund Performance vs. Benchmark Index Return Dec 13 Apr 14 Aug 14 Dec 14 Apr 15 Aug 15 Manulife China Equity Fund Return Source: Lipper & Bloomberg L.P. Dec 15 Apr 16 Aug 16 Dec 16 Apr 17 Aug 17 Dec 17 Benchmark Index Return Apr 18 3

7 (b) Average Total Return of the Fund: For the financial period ended 30 April 2018 Fund (% p.a.) Benchmark (% p.a.) 1 year years years Commencement Date: 7 January 2010 Source: Lipper & Bloomberg L.P. (c) Annual Total Return of the Fund: For the financial period ended: Fund (% p.a.) Benchmark (% p.a.) 30 April April April 2016 (23.75) (18.05) 30 April April Commencement Date: 7 January 2010 Source: Lipper & Bloomberg L.P. 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% 4

8 The following table shows other financial and performance data of the Fund for the past three financial periods: Fund Data 30 April April April 2016 NAV (RM) 105,672,776 32,957,603 20,544,100 Units in Circulation ( 000) 127,211 42,161 34,131 NAV (RM per unit) Highest / Lowest NAV (RM per unit) Total Fund Return (%) NAV Return (%) Income Return (%) / (5.62) (5.62) / / (19.14) (19.14) - Management Expense Ratio (%) Portfolio Turnover Ratio (times) NOTES (i) Management Expenses Ratio (MER) MER can be calculated based on the ratio of the sum of fees and the recovered expenses of the unit trust fund to the average value of the unit trust fund calculated on a daily basis. Fees of the unit trust fund + Recovered expenses of the unit trust fund Average value of the unit trust fund calculated on a daily basis x 100 Where: Fees Recovered expenses Average value of the unit trust fund = All ongoing fees deducted / deductible directly from the unit trust fund in respect of the period covered by the management expense ratio, expressed as a fixed amount, calculated on a daily basis. This would include the annual management fee, the annual trustee fee and any other fees deducted / deductible directly from the unit trust fund; = All expenses recovered from/ charged to the unit trust fund, as a result of the expenses incurred by the operation of the unit trust fund, expressed as a fixed amount. This should not include expenses that would otherwise be incurred by an individual investor (e.g. brokerage, taxes and levies); and = The NAV of the unit trust fund, including unit trust net income value of the fund, less expenses on an accrued basis, in respect of the period covered by the management expense ratio, calculated on a daily basis. The MER for the financial period remain fairly consistent with previous financial period. 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 period to the average value of the unit trust fund for the period 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 previous financial period mainly due to the decrease in trading activities. 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 of the Fund for the past three financial periods: Sector Allocation % of Net Asset Value 30 April April April 2016 Collective Investment Scheme Deposits with Licensed Financial Institutions Other Assets & Liabilities As at 30 April 2018, the Fund was 97.19% invested in Collective Investment Scheme and 2.81% in cash and cash equivalents. Asset allocation of the Target Fund for the past three financial periods: % of Net Asset Value Sector Allocation 30 April April April 2016 Information Technology Financials Consumer Discretionary Real Estate Health Care Others Utilities Energy Consumer Staples Materials Industrials Banks Insurance Oil & Gas Telecommunication Services Cash

10 2.3 MARKET REVIEW During the six-month financial period under review (1 November 2017 to 30 April 2018), at the country level, stock selection in China added value while stock selection in Hong Kong and Taiwan dragged performance. At the sector level, stock selection in information technology was the notable detractor. Within the information technology sector, the Target Fund s exposure in a Taiwan-based electrical components manufacturer (which is one of Apple concept names) detracted performance after Apple trimmed its sales projection for smartphones. Another detractor was a top three global camera phone lens suppliers, which saw earnings weakness in the first quarter. We believe that the company has leading R&D and technology know-how in areas including 7P lenses and triple camera, which will be in mass production in These will be the key product differentiations to drive earnings growth in the coming year. On the positive side, stock selection in utilities and consumer staples, as well as an overweight in healthcare, helped performance. Within consumer staples, one of the leading contributors was a Taiwanese health foods and beauty care manufacturer and distributor. The company benefited from the potential of its multi-engines product, packaging innovation and investment in niche functional-food ingredients. As e-commerce sales of health-related products in China expanded rapidly, orders from China increased sharply with the company able to ramp up capacity quickly to meet the increased demand. As a result, the company delivered betterthan-expected earnings, which helped its stock price to more than double during the six-month period. 2.4 MARKET OUTLOOK AND INVESTMENT STRATEGY The near-term noise and uncertainties revolving around the trade war tensions may linger on-and-off, which in turn could cause market sentiment to be more sensitive to news flows. In the medium to longer term, we remain positive on Greater China equities. Solid 1Q 2018 earnings, inexpensive valuations and a positive liquidity story will continue to play out for this asset class: Earnings: So far, 1Q 2018 earnings results saw aggregate profit growing 15% yearon-year (y-o-y). In particular, earnings revisions continue to trend up for the energy, materials and consumer related sectors. Valuations: China is currently trading at 12.9x forward earnings, which is at meaningful discounts relative to the developed markets valuation. Liquidity: Despite the Southbound flows having slowed in the past two months as the reminbi (RMB) strengthens and volatility rises, cumulative net buying has already amounted to US$15bn year-to-date (YTD), which tracked around 30% of consensus US$51bn estimate. Importantly, Southbound ownership has further edged up in Hong Kong year-to-date, with materials and staples seeing the strongest pick-up. In terms of investment strategy, we continue to focus on companies with greater exposure to the domestic Chinese economy. In particular, we like stocks that would benefit from increased consumption upgrade, greater innovation and policy driven initiatives. From a sector perspective, we continue to favour information technology stocks, particularly in the internet segment, which is largely domestically driven. We also favour companies that invest in their future growth, especially in R&D. In addition, we prefer companies that are generating strong returns on investment from their capital spending, which in turn would contribute to future revenue and earnings growth. We are seeing value in the healthcare sector, particularly in China on the back of new government policies to expand and improve healthcare services. These initiatives have expedited innovation from different biotech/biopharmaceutical companies. A significant number of approvals for new medications, particularly in oncology, should also help drive growth in the sector. 7

11 Overall, stocks in the Greater China region are well-positioned to benefit from the continued progress towards long-term structural growth in the Chinese economy. Although external risks remain, including trade war issues with the U.S., we continue to see healthy earnings growth and attractive valuations in the region s equity markets. 2.5 BREAKDOWN OF UNIT HOLDINGS BY SIZE AS AT 30 APRIL 2018 The following table presents the distribution of the Fund s unit holders according to size of unit holdings: Size of Holdings No. of Unit Holders % No. of Units Held ( 000) % 5,000 and below 1, , ,001 to 10, , ,001 to 50,000 1, , ,001 to 500, , Above 500, , Manager s stock Total 4, , STATE OF AFFAIRS Notification Of Changes A Second Supplemental Master Prospectus to the Master Prospectus dated 29 December 2016 and Supplemental Master Prospectus dated 10 November 2017 was issued on 14 June 2018 to make the following which have been effective since 14 June 2018: Changes to MGF-CVF s disclosure a) Investment objective inclusion of percentage exposure in relation to primary investments. b) Investment strategy clarification of the term equity and equity-related securities ; inclusion of investment directly in China A-Shares listed on the Shenzhen Stock Exchange in Mainland China via the Shenzhen-Hong Kong Stock Connect scheme or Shanghai Stock Exchange in Mainland China via the Shanghai-Hong Kong Stock Connect scheme; confirmation that while MGF-CVF will invest in accordance with its investment objective and strategy (subject to applicable laws and regulations), it is not otherwise subject to any limitation on the portion of its net assets that may be invested in any one country or sector and in issuers of any market capitalisation; identification of key jurisdiction of issuers in which MGF-CVF will invest 30% or more of its net assets; clarification that MGF-CVF may invest 30% or more of its net assets in small and medium-sized companies; clarification that MGF-CVF investments may be denominated in any currency; and confirmation that it is not the intention of MGF-CVF to invest more than 10% of its net assets in securities issued, or guaranteed, by any single sovereign (including the relevant government, public or local authority) which has a credit rating that is below investment grade (i.e. below Baa3 by Moody s or BBB- by Standard & Poor s or Fitch). 8

12 c) Specific risk disclosure enhancement and streamlining of disclosures on Changes resulting from the United Kingdom s exit from the EU and Mainland China Tax; and inclusion of investment directly in China A-Shares listed on the Shenzhen Stock Exchange in Mainland China via the Shenzhen-Hong Kong Stock Connect scheme or Shanghai Stock Exchange in Mainland China via the Shanghai-Hong Kong Stock Connect scheme; removal of outdated disclosure and other miscellaneous formatting, administrative and/or clarificatory updates to address latest regulatory requirements and/or for better clarity. General and administrative updates Revision to definition and disclosure of launch date for clarity; Amendments to nature of transaction between the Manager with related parties; Inclusion of disclosure on cross trade policy; and Updates to how you can keep abreast of fund developments and financial reports of the Fund. The Second Supplemental Master Prospectus dated 14 June 2018 is available in the company website: 9

13 3 POLICY ON STOCKBROKING REBATES AND SOFT COMMISSIONS The Management Company did not retain any rebates. For the six months financial period ended 30 April 2018, the Management Company or its Fund Manager did not receive any soft commissions. 10

14 4 STATEMENT BY THE MANAGER MANULIFE 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 30 April 2018 and of its financial performance, changes in equity and cash flows of the Fund for the six months financial period ended 30 April 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 28 June

15 5 TRUSTEE S REPORT TO THE UNIT HOLDERS OF MANULIFE We have acted as Trustee of Manulife China Equity Fund ( the Fund ) for the financial period ended 30 April To the best of our knowledge, Manulife Asset Management Services Berhad ( the Management Company ), has operated and managed the Fund in accordance with the following:- a) limitations imposed on the investment powers of the Management Company and the Trustee under the Deeds, the Securities Commission s Guidelines on Unit Trust Funds, the Capital Markets and Services Act 2007 and other applicable laws; b) valuation/pricing is carried out in accordance with the Deeds and any regulatory requirements; and c) creation and cancellation of units are carried out in accordance with the Deeds and any regulatory requirements. For HSBC (Malaysia) Trustee Berhad Tan Bee Nie Head,Trustee Operations Kuala Lumpur 28 June

16 6 STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL 2018 INVESTMENT (LOSS)/INCOME Note Interest income 64,182 20,332 Net (loss)/gain on financial assets at fair value through profit or loss 6 (5,538,230) 3,101,927 Net foreign currency exchange loss (170,284) (102,025) RM RM (5,644,332) 3,020,234 EXPENSES Manager s fee 3 149,009 49,057 Trustee s fee 4 33,771 11,299 Auditors remuneration 2,876 2,876 Tax agent s fee 2,074 1,339 Other expenses 22,104 11, ,834 75,634 (LOSS)/PROFIT BEFORE TAXATION (5,854,166) 2,944,600 TAXATION (LOSS)/PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE (LOSS)/PROFIT (5,854,166) 2,944,600 (Loss)/profit after taxation is made up as follows: Realised 157,963 1,863,547 Unrealised (6,012,129) 1,081,053 (5,854,166) 2,944,600 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 13

17 7 STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 2018 Note RM RM ASSETS Financial assets at fair value through profit or loss 6 102,702,425 31,972,529 Amount due from Manager 532,950 4,274,435 Cash and cash equivalents 7 2,512,122 1,037,227 TOTAL ASSETS 105,747,497 37,284,191 LIABILITIES Amount due to Manager - Manager s fee 30,230 8,557 - Cancellation of units 16, ,120 Amount due to Trustee ,955 Amount due to stockbrokers - 4,135,400 Other payables 8 21,252 23,556 TOTAL LIABILITIES 74,721 4,326,588 NET ASSET VALUE ( NAV ) OF THE FUND 105,672,776 32,957,603 EQUITY Unit holders capital 99,325,567 25,574,441 Retained earnings 6,347,209 7,383, ,672,776 32,957,603 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 2 105,672,776 32,957,603 NUMBER OF UNITS IN CIRCULATION 9 127,211,061 42,161,061 NAV PER UNIT The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 14

18 8 STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL 2018 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 NOVEMBER ,614,568 12,201,375 60,815,943 Movement in unit holders contribution: Creation of units 78,527,731-78,527,731 Cancellation of units (27,816,732) - (27,816,732) Total comprehensive loss - (5,854,166) (5,854,166) BALANCE AS AT 30 APRIL ,325,567 6,347, ,672,776 Unit holders Retained capital earnings Total RM RM RM BALANCE AS AT 1 NOVEMBER ,042,213 4,438,562 25,480,775 Movement in unit holders contribution: Creation of units 35,621,053-35,621,053 Cancellation of units (31,088,825) - (31,088,825) Total comprehensive income - 2,944,600 2,944,600 BALANCE AS AT 30 APRIL ,574,441 7,383,162 32,957,603 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 15

19 9 STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL 2018 CASH FLOWS FROM OPERATING ACTIVITIES Note Purchase of investments (67,017,039) (25,652,611) Sale of investments 15,399,759 26,061,698 Net realised foreign exchange loss (170,284) (102,024) Dividends received 172, ,981 Interest income received 64,182 20,331 Manager s fee paid (135,792) (48,407) Trustee s fee paid (30,714) (11,164) Audit fee paid (5,800) (5,800) Tax agent s fee paid (2,700) (735) Payment for other fees and expenses (27,374) (8,898) Net cash (used in)/generated from operating activities (51,753,297) 407,371 RM RM CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from creation of units 78,884,218 31,346,618 Payments for cancellation of units (27,800,394) (31,417,195) Net cash generated from/(used in) financing activities 51,083,824 (70,577) Net (decrease)/increase in cash and cash equivalents (669,473) 336,794 Currency translation differences - - Cash and cash equivalents at the beginning of the financial period 3,181, ,433 Cash and cash equivalents at the end of the financial period 7 2,512,122 1,037,227 Cash and cash equivalents comprise: Deposits with licensed financial institutions 7 2,483, ,941 Bank balances in a licensed bank 28,682 74,286 2,512,122 1,037,227 The accompanying summary of significant accounting policies and notes to the financial statements form an integral part of these financial statements. 16

20 10 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL 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 30 April The Fund has applied the following amendments for the first time for the financial period beginning 1 January 2017: Amendments to MFRS 107 Statement of Cash Flows - Disclosure Initiatives (effective from 1 January 2017) introduce an additional disclosure of 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 period beginning on/after 1 May 2019 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. 17

21 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 stated 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 collective investment scheme 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, tax recoverable, cash and cash equivalents in the statement of financial position. 18

22 Other financial liabilities The Fund classifies amount due to Manager, amount due to Trustee, amount due to stockbrokers, other payables and distribution payable as other financial liabilities. (ii) Recognition and initial measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Fund commits to purchase or sell the assets. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in profit or loss. Loans and 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 six months 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. 19

23 (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. 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. 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 collective investment schemes 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 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.vered on the statement of financial position date respectively. 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. 20

24 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 CURRENCY TRANSLATION The financial statements are presented in Ringgit Malaysia, which is the Fund s functional and presentation currency. Transactions in foreign currencies during the financial year are converted to Ringgit Malaysia at rate of exchange ruling at transaction dates. Assets and liabilities denominated in foreign currencies at the date of the statement of financial position are translated into Ringgit Malaysia at the rate of exchange approximating those ruling on that date. Exchange differences arising from the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are included in the statement of comprehensive income. I FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and the measurement date. The information presented herein represents the estimates of fair value as at the date of the statement of financial position. Where available, quoted and observable market prices are used as the measure of fair values. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in the uncertainties and assumptions could materially affect these estimates and the resulting fair value estimates. A range of methodologies and assumptions has been used in deriving the fair values of the Fund s financial instruments as at the date of statement of financial position. The total fair value of each financial instrument is not materially different from the total carrying value. The fair values are based on the following methodologies and assumptions: (a) Short-term deposits with financial institutions For deposits and placements with financial institutions with maturities of less than three months, the carrying value is a reasonable estimate of fair value. For deposits and placements with maturities of three months and above, the estimated fair value is based on discounted cash flows by using prevailing interbank money market interest rates at which similar deposits and placements would be made with financial institutions of similar credit risk and remaining period to maturity. 21

25 (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,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. 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. 22

26 11 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 APRIL INFORMATION ON THE FUND Manulife China Equity Fund ( the Fund ) was established pursuant to a Master Deed dated 27 October 2009, as amended and supplemented by subsequent Supplemental Deed (hereinafter referred to as the Deed ) between Manulife Asset Management Services Berhad ( the Manager ) and HSBC (Malaysia) Trustee Berhad ( the Trustee ). The principal activity of the Fund is to invest in Investments as defined under Clause 1 of the Deed. The Fund may invest in collective investment schemes, liquid assets and money market instruments (including fixed income securities of not more than 365 days) and deposits with any financial institutions and any other forms of investments as may be permitted by the Securities Commission from time to time. The Fund commenced operations on 7 January 2010 and will continue its operations until terminated as provided under Clause 12 of the Deed. The Fund aims to achieve long-term capital growth through investment, primarily in undervalued companies with long term potential and substantial business interest in the Greater China Region (which includes People's Republic of China, Hong Kong and Taiwan) which are listed or traded on stock exchanges of Shanghai, Shenzhen, Hong Kong,Taipei or other exchanges. 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 to 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 28 June 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. The management fee paid to the manager is net of rebate. Rebate is recognised at a rate of 1.50% per annum on the collective investment scheme s fair value over the number of dealing days, calculated and accrued daily. 23

27 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. 5 TAXATION RM RM Current taxation: - - Numerical reconciliation between (loss)/profit before taxation multiplied by the Malaysian statutory tax rate and tax expenses of the Fund is as follows: RM RM (Loss)/profit before taxation (5,854,166) 2,944,600 Tax calculated at Malaysian tax rate of 24% (2017: 24%) (1,405,000) 706,704 Tax effect in respect of: - Expenses not deductible for tax purposes 13,908 4,855 - Restriction on tax deductible expenses for unit trust funds 36,452 13,297 - Investment income/(loss) not subject to tax 1,313,772 (724,856) - Effect of foreign taxable income/(loss) 40,868 - Tax expenses FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Designated at fair value through profit or loss - Collective investment scheme 102,702,425 31,972,529 RM RM RM RM Net (loss)/gain on financial assets at fair value through profit or loss - Realised 473,900 2,020,874 - Unrealised (6,012,130) 1,081,053 (5,538,230) 3,101,927 24

28 6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) Fair value as Fair value at expressed as COLLECTIVE INVESTMENT Cost of as at percentage of SCHEME Quantity shares value of Fund Units RM RM % MGF-CVF LU Class A 2,602, ,862, ,702, TOTAL COLLECTIVE INVESTMENT SCHEME 2,602, ,862, ,702, ACCUMULATED UNREALISED LOSS ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (159,904) TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 102,702,425 COLLECTIVE INVESTMENT SCHEME Quantity Cost of shares Fair value as at Fair value as at expressed as percentage of value of Fund Units RM RM % MGF-CVF LU Class A 869,754 29,862,679 31,972, TOTAL COLLECTIVE INVESTMENT SCHEME 869,754 29,862,679 31,972, ACCUMULATED UNREALISED GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 2,109,850 TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 31,972,529 25

29 7 CASH AND CASH EQUIVALENTS RM RM Deposits with licensed financial institutions 2,483, ,941 Bank balance in a licensed bank 28,682 74,286 2,512,122 1,037,227 Weighted average rates of returns are as follow: % % Short-term deposits with licensed financial institutions The deposits have an average maturity of 2 days ( : 4 days) 8 OTHER PAYABLES RM RM Auditors remuneration 2,876 2,876 Tax agent s fee 4,039 3,304 Sundry payables and accruals 14,337 17,376 21,252 23,556 9 UNITS IN CIRCULATION No. of units No. of units At beginning of the financial period 69,091,061 36,451,061 Add: Creation of units 90,950,000 46,890,000 Less: Cancellation of units (32,830,000) (41,180,000) At end of the financial period 127,211,061 42,161,061 26

30 10 BROKERS' AND FINANCIAL INSTITUTIONS TRANSACTIONS The details of transactions with dealers/brokers by value of trades are as follows: 2017 Citibank International Private Limited Company (Luxembourg Branch) 55,144, CIMB Bank Berhad 14,940, Malayan Banking Berhad 14,565, Public Bank Berhad 13,635, ,284, For the six months financial period ended 30 April 2018, there were no transactions with brokers. For the six months financial period ended 30 April 2018, details of transaction with brokers by value of trades apply only to equities. This took effect from 24 May 2017 as per Securities Commission's Guidelines on Unit Trust Funds. As at the end of each financial period, there were no transactions with related parties. 11 UNITS HELD BY THE MANAGER AND PARTIES RELATED TO THE MANAGER The related party and their relationship with the Fund are as follows: Related parties Manulife Asset Management Services Berhad Manulife Financial Corporation ( Manulife ) Manulife Holdings Berhad Subsidiaries and associates of Manulife as disclosed in its financial statements Directors of Manulife Asset Management Services Berhad Relationship The Manager Ultimate holding company of the Manager Immediate holding company of the Manager Subsidiaries and associate companies of the ultimate holding company of the Manager Directors of the Manager Units held by the Manager and party related to the Manager: DIRECTOR OF THE MANAGER WONG BOON CHOY** MANAGER MANULIFE ASSET MANAGEMENT SERVICES BERHAD * As at: No. of units RM No. of units RM , , , , , ,021 65,562 51,250 * The units are held legally and beneficially ** The units are held legally In addition to the related party disclosure mentioned elsewhere in the financial statements, there were no other significant related party transactions and balances. 27