SIP LIFESTYLE PORTFOLIOS FACT SHEET (FEB 2017) SIP Aggressive Portfolio SIP Aggressive Portfolio is a unitized fund, which is designed to provide long term capital growth. It is designed for those who hold a long term investment view and who are prepared to accept significant fluctuations in the value of their investment in order to achieve long term returns. MGF - American Growth Fund (A Share) 39.3% MGF - US Small Cap Equity Fund (AA Share) 15.6% MGF-Global Property Fund (AA Share) 2.1% MGF-European Growth Fund (A Share) 13.5% MGF-Japanese Growth Fund (A Share) 5.2% MGF-Asian Equity Fund (A Share) 1.9% MGF-Global Resources Fund (AA Share) 4.9% MGF-US Bond Fund (AA Share) 7.2% MGF-US Special Opportunities Fund (AA Share) 10.4% MGF-US Treasury Inflation-Protect Fund (AA Share) 3.1% Information Liquidity and others -3.1% Investment Management Fee : 1.40% per annum NAV per Unit 1.2739 5.56 million : 4.37 million SIP Growth Portfolio SIP Growth Portfolio is a unitized fund, which is designed to provide medium to long term capital growth for those who hold a long term investment view and who are prepared to accept considerable fluctuations in the value of their investments in order to achieve long term returns. MGF - American Growth Fund (A Share) 33.3% MGF - US Small Cap Equity Fund (AA Share) 4.2% MGF-Global Property Fund (AA Share) 7.2% MGF-European Growth Fund (A Share) 8.1% MGF-Japanese Growth Fund (A Share) 3.1% MGF-Asian Equity Fund (A Share) 1.1% MGF-Global Resources Fund (AA Share) 5.0% MGF-US Bond Fund (AA Share) 18.2% MGF-US Special Opportunities Fund (AA Share) 16.6% MGF-US Treasury Inflation-Protect Fund (AA Share) 5.2% Information Liquidity and others -2.0% Investment Management Fee : 1.30% per annum NAV per Unit 1.3023 5.29 million : 4.06 million 1 Month 3 Months 6 Months YTD 1 Year 3 Years 5 Years Since Inception 1 Month 3 Months 4.48% 6 Months Aggressive Portfolio 2.86% 5.47% 5.10% 3.89% 19.65% 3.99% 24.31% 27.39% Growth Portfolio 2.41% 2.99% YTD 3.29% 1 Year 14.89% 3 Years 2.09% 5 Years 19.04% Since Inception 30.23%
SIP Balanced Portfolio SIP Balanced Portfolio is a unitized fund, which is designed to provide medium to long term capital growth for those who hold a long term investment view and who are prepared to accept fluctuations in the value of their investments in order to achieve long term returns. MGF - American Growth Fund (A Share) 20.5% MGF - US Small Cap Equity Fund (AA Share) 4.2% MGF-Global Property Fund (AA Share) 5.1% MGF-European Growth Fund (A Share) 7.9% MGF-Japanese Growth Fund (A Share) 2.6% MGF-Asian Equity Fund (A Share) 0.9% MGF-Global Resources Fund (AA Share) - MGF-US Bond Fund (AA Share) 41.8% MGF-US Special Opportunities Fund (AA Share) 13.3% MGF-US Treasury Inflation-Protect Fund (AA Share) 4.1% Information Liquidity and others -0.3% Investment Management Fee : 1.20% per annum NAV per Unit 1.3232 4.65 million : 3.51 million Balanced Portfolio 1 Month 2.04% 3 Months 3.52% 6 Months 1.55% YTD 2.70% 1 Year 10.42% 3 Years 1.62% 5 Years 15.27% Since Inception 32.32% The SIP Lifestyle Portfolios are managed by Manulife Asset Management Services Berhad and are fund of funds structures. They invest all or substantially all of their assets into the Underlying Funds under the Manulife Global Fund platform. Please refer to the for the list of the Underlying Funds and the allocation for the respective portfolios. Past performance is not an indication for future results. This report is prepared for information purposes only. Important Notes: The fund performances are strictly the performance of the investment-linked (IL) fund and not to be treated as the gross premium/contribution of the IL insurance product. In the event of exceptional circumstances, such as high volume of sale investment within a short period of time, Manulife Insurance Berhad ("the Company") reserves the right to defer or suspend issuance or redemption of units. Page 2 of 5
and Outlook (Feb 2017) Asia Pacific ex Japan Asia Pacific ex Japan equities rose during the month, with all countries posting positive returns except for the Philippines, as market sentiment further improved on continuously robust economic data in the region. Furthermore, inflation was higher than expected for most countries in Asia. China s economic activity in January was strong as seen in its manufacturing Purchasing Managers Index (PMI), exports, and inflation data. Producer Price Index (PPI) in January continues to grow, which is supportive of pricing power returning to corporates. The central bank marginally increased the cost of shortterm funding while keeping liquidity flush. Fixed investment projects amounting to US$22.3 billion were approved by the government as part of its commitment to boost infrastructure spending. Taiwan s GDP growth in the fourth quarter of 2016 was better than expected at 2.9% year-on-year driven by exports and capex. South Korea s exports in January surged 11.2% year-on-year on the back of semiconductors, petrochemicals, and overall better pricing. Household credit growth during the fourth quarter of last year remains strong given that individuals were shifting from bank loans to non-bank loans. Singapore s GDP growth for the fourth quarter of 2016 was revised higher, driven by robust manufacturing activity during the same period. Full year 2016 GDP growth registered at 2.9% year-on-year. Thailand s GDP in the fourth quarter of 2016 grew by 3.0% year-on-year full year 2016 growth was 3.2% due to the government s proactive fiscal policies. Indonesia s exports in January grew the fastest in six years at 27.7% year-on-year driven by the higher value of its shipments. Malaysia s exports growth in December remains robust due to strong demand for electrical and electronic goods, as well as commodities. In the Philippines, the central bank kept policy rates unchanged, citing upside risks to its current inflation outlook. India s third quarter GDP growth for the 2017 fiscal year was better than expected at 7.0% year-on-year, despite the demonetisation in November, due to strong government spending and agricultural production. The Union Budget for 2017 2018 presented by the Finance Minister was well-received by investors. This highlights the country s further fiscal consolidation, improved quality of government spending, and tax reforms. The central bank kept benchmark rates steady, and changed its monetary policy stance from accommodative to neutral. Australia s central bank kept the cash rate unchanged. It sees the current policy settings appropriate to achieve economic growth and inflation targets. Markets across the Asia Pacific ex Japan region, except for Indonesia, performed strongly since the middle of February 2017. China has outperformed as economic data continue to show further signs of stabilisation and improvement in the domestic economy. The government continues to pursue supply side reforms, which helped lift expectations of earnings recovery in material companies in steel, coal, and cement companies. Strong economic data in the US has also prompted the Fed to raise rates earlier than expected. This should bode well for companies benefiting from higher interest rates, particularly the insurers. Indonesia has lagged its Asian peers on a year-to-date period. This is largely due to concerns around the reoccurrence of significant currency weakness during the Fed normalisation cycle and uncertainty around the Jakarta gubernatorial election. We believe such concerns are unfounded. Indonesia is on a much stronger footing than before following a series of reforms in the last few years and the recovery of commodity prices. Value is emerging in this market and every weakness is used as an opportunity to buy. Amid rapid change in market dynamics, the opportunities in Asia still appear compelling relative to its peers in the developed markets. Earnings revisions are turning positive and valuations remain reasonable. A more stable currency and benign interest rate and inflation environment provide further appeal to the region. North America The US stock market set record highs in February, and benefited as positive data on consumers, housing, and employment fuelled optimism around the economy s prospects. Relatively healthy corporate earnings and expectations of higher interest rates, deregulation, and tax reform also helped drive share prices higher. Top gainers in the S&P 500 Index included the healthcare, utilities, financials, and information technology sectors, while energy stocks were laggards. We believe US stocks stand to benefit from favourable trends in US economic growth, consumer confidence, and housing. They also stand to benefit from a sound financial system. In our view, stock valuations remain reasonable, especially given a positive outlook for earnings growth. We ve found some of the best opportunities in the financials and consumer discretionary sectors, both of which were overweights by period-end. Europe The market turned more defensive in February, with stocks in the consumer staples and healthcare sectors outperforming. Cyclical stocks had led the rally since the US election in expectation of global growth accelerating, but short covering in bond markets after the selloff caused a correction. US-based Kraft Heinz bid for Anglo-Dutch consumer products giant Unilever before rapidly withdrawing the offer. This was due to a vehement rejection by the management, and concerns expressed by UK and Dutch governments. With populist and nationalist sentiment on the rise across Europe, such a deal was unlikely to succeed. However, it did underscore that from a US buyer s perspective, the strength of the US dollar has made acquisitions in Europe an attractive prospect. We see plenty of reasons for caution on the horizon, not least of which is the upcoming French election, which could precipitate the breakup of the EU. Corporate margins could also come under pressure from raw material inflation, minimum wage increases, and protectionist measures. While valuations in Europe look relatively attractive compared to those in the US, we are finding far fewer investment candidates than this time a year ago. That said, the surprising calmness seen in markets year-to-date is unlikely to hold. This would suit our investment process as periods of volatility typically introduce opportunities to purchase companies from our stock inventory at a greater-than-25% discount to their intrinsic value. Page 3 of 5
introduce opportunities to purchase companies from our stock inventory at a greater-than-25% discount to their intrinsic value. and Outlook (Feb 2017) (continued) Japan The market was up slightly over the month both in local currency and in US dollars. The market appeared to be treading water after a relatively uneventful third quarter results session, with few companies revising their earnings up or down. There was nothing particularly outstanding about the month s set of economic releases, except Japan s Producer Price Index (PPI), which moved back into positive territory for the first time since March 2015. China s PPI moved back into positive territory in September 2016. We note that the index is generally considered to be a useful indicator of economic growth. Another indicator of economic health is new housing starts, which have been quietly improving and have now recovered to levels last seen prior to the April 2014 consumption tax hike. The best performing sectors were rubber and shipping, and the worst performing sectors were autos and telecoms. However, there was no major difference in performance between most sectors. Toyo Tire and Minebea Mitsumi were strong performers over the month. Both stocks were weak performers last year, but their earnings results and forecasts were better than expected. Toshiba was again one of the worst performers due to continued troubles over its nuclear liabilities. Since the inauguration of President Trump on 20 January, uncertainty over the long-term outlook for global trade has increased. However, improving Japanese economic growth should help drive earnings growth in 2017. Earnings growth stagnated in 2016 as the yen strengthened and companies struggled to grow sales both at home and overseas. The outlook is quite different for 2017. The government has recently upgraded its real GDP outlook for the year ahead from 1.2% to 1.5%, and overseas demand looks better with Chinese PPI (Producer Price Index) rising sharply into positive territory. We are expecting earnings growth for 2017 to be ahead of consensus. Japan remains the cheapest developed market on both price to earnings and price to book. Japan s return on equity (ROE) has also been steadily improving and currently stands at 8.5%. We believe this could reach over 10% in 2017. Although this is still below the US, it is on a faster growth path. One of the drivers for higher ROE is the record level of share buybacks. The majority of Japanese corporates have a net cash position that gives them ample opportunity to make further buybacks in 2017. Global In what was a quiet month for equity markets, global indices advanced modestly on investor optimism about growth prospects in the US and Europe. Many companies released their quarterly earnings reports during the month. Defensive sectors were in favour with investors, as the healthcare and consumer staples sectors were the best performing sectors. The cyclical energy and materials sectors lagged. Regionally, the US was the best performing market based on investor optimism that potential policies under President Donald Trump could stimulate growth, although no specifics were announced. We continue to believe that valuations remain elevated and, if anything, the enthusiasm witnessed since the US election has stretched traditional multiples even further. Looking in the rear-view mirror, we need to go back to the early 2000s to see comparable price/earnings multiples; at the time, we were recovering from a slowdown with margins poised to rebound. Today, we know margins are closer to their recent peaks than the trough of early 2000, so growth expectations seem to be placed largely on the top line. Enthusiasm for the handover from monetary to fiscal policies should support this, and much of the political commentary seems to support both spending and the business community. Looking forward, global earnings growth expectations remain similar to the US (at around 13%), and markets are increasingly dependent upon this being delivered. This is despite the traditional tendency to undershoot expectations, which should ensure a smooth journey as we progress through 2017. Assuming this growth arrives, it will be interesting to see whether company management teams use the subsequent cash to invest in their businesses or repair what we believe are stretched balance sheets. International markets remain cheaper than the US and the Fund has an overweight position in that part of our global universe. One potential factor that may depress European multiples could be the many elections upcoming in 2017. Having experienced the surprises of Brexit and the Trump victory, we need to be cognisant of the potential for surprises. Such surprises will most likely affect currencies first, with the effect on equities being a secondary impact. The Fund s European exposure is part domestic, part export Europe. In other markets, we remain attracted to Japan a relatively cheap market within a global context. One area of risk particularly susceptible to currency moves is emerging markets. This has been a beneficiary of the recent US dollar easing. The strength of the US economy, along with its impact on interest rate policy and the direction of the dollar, will have a large impact on emerging markets. To date, the year has started as it ended in 2016: investors largely embraced the reflationary policies being discussed. Defensive positions seem to have funded more cyclical ones. Within the Fund, we remain reasonably evenly balanced between the extremes of these two positions. We hold a large position in the US financials sector and a reasonable position in the global consumer staples sector. The former should largely prove a warrant on the local economy, and the latter provides some steady dependable free cash flows at appealing yields. Other than low valuations, there is no particular theme to the areas we are seeking ideas as we search a relatively expensive world for high-quality companies being misunderstood and trading at low multiples. Page 4 of 5
SIP Lifestyle Portfolio (Feb 2017) (continued) Investment in the fund is subject to certain risks, including but not limited to: Risk Type Description Risk Management (Bond funds) Risk Management (Equity funds) Fund Management Risk The selection of securities which make up the investments of the fund is subjective and securities selected may perform better or worse than overall market. To mitigate this risk, the investment Manager has in place a disciplined investment process and practices prudent risk management. Manager has in place a disciplined investment process and practices prudent risk management. In addition, risk is also monitored through risk models. Liquidity Risk Market or Price Risk Timing Risk Company / Stock Specific Risk Interest Rate Risk The risk of the funds being unable to meet their obligations at the reasonable cost or at any time. Market risk arises when the value of the securities fluctuate in response to the general market and economic conditions. The risk is subject to the volatility of the market/interest rate. The risk of loss due to the fall of stocks/shares prices given the deteriorating business condition. Manager will review and monitor the Fund continuously, and actively manage asset allocations of the Fund. In addition, the investment Manager will practice prudent liquidity management to enable the Fund to meet short term obligations. The Investment Manager will attempt to diversify the portfolio, and monitor the investment climate and market conditions to take measures, where necessary and appropriate, to mitigate this risk. The Investment Manager will manage it based on its professional knowledge and experienced investment skill. The interest rate is a general economic This risk will be mitigated via the N/A indicator that will have an impact on the management of the duration of the management of the Fund. This risk refers fixed income securities. to the effect of interest rate changes on the market value of fixed income securities. In the event of rising interest rates, prices of fixed income securities will decrease and vice versa. Meanwhile, fixed income securities with longer maturities and lower coupon/profit rates are more sensitive to interest rate changes. N/A Manager will review and monitor the Fund continuously, and actively manage asset allocations of the Fund. In addition, the Investment Manager will practice prudent liquidity management. This risk is managed through sector/stock diversification and asset allocation. Timing risk will be managed via technical tools (i.e. from Bloomberg) as well as based on the Investment Manager's professional knowledge and experience investment skill. Manager will be performing continuous research and analysis on the balance sheet strength, earnings generation capability and strength of management team of the company. Inflation Risk Credit Risk This is the risk that investors' investment The risk may be mitigated by investing N/A in the Fund may not grow or generate in fixed income securities that can income at a rate that keeps pace with provide positive real rate of return. inflation. The risk of loss due to the counter party's Credit risk may be managed by N/A inability to make payment of coupon/profit performing continuous fundamental and/or principal. credit research and analysis to ascertain the creditworthiness of its issuer. Page 5 of 5