MANULIFE INVESTMENT -CM FLEXI FUND
CONTENTS PAGE
1 General Information 1
2 Manager’s Report 3
3 Policy On Stockbroking Rebates And So Commissions 9
4 Statement By The Manager 10
5 Trustee’s Report 11
6 Statement Of Comprehensive Income 12
7 Statement Of Financial Position 13
8 Statement Of Changes In Equity 14
9 Statement Of Cash Flows 15
10 Summary Of Signi cant Accounting Policies 16
11 Notes To The Financial Statements 21
12 Corporate Information 36
MANULIFE INVESTMENT -CM FLEXI FUND
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 BASE CURRENCY
Ringgit Malaysia (RM)
1.4 OBJECTIVE OF THE FUND
The Fund seeks to provide Unit Holders with long-term capital appreciation.
Note: Any material change to the Fund’s investment objective would require Unit Holders’ approval.
1.5 DISTRIBUTION POLICY
Income distribution (if any) is incidental.
1.6 PERFORMANCE BENCHMARK
50% FTSE Bursa Malaysia Top 100 Index (FBM100) + 50% CIMB 12-month xed deposit (FD) rate.
Note: The composite benchmark provides a balanced gauge on the asset allocation of the Fund which can invest up to 98% of its net asset value (NAV) in equities and/or equity-related instruments or xed income instruments. The composite benchmark is only used as a reference for performance gauge purpose. The risk pro le of the Fund is not the same as the risk pro le of this benchmark. The benchmark information is available in www.manulifeinvestment.com.my.
1.7 INVESTMENT STYLE AND STRATEGY
The Fund invests in a diversi ed portfolio of equities and/or equity-related instruments as well as xed income instruments (which includes money market instruments). Liquid assets such as money market instruments and deposits (excluding structured deposits) are used to maintain liquidity position and as a short-term alternative should the equity or bond markets become extremely volatile. The Fund may invest in the investments directly or via Collective Investment Schemes (CISs).
The Fund may invest up to 98% of its net asset value (NAV) in a single asset class of equities and/or equity-related instruments or xed income instruments. This allows the Fund the exibility to switch to equities and/or equity-related instruments when the stock market is bullish and to bonds and/or money market instruments when the stock market is bearish. At any one time, the asset mix may also comprise all asset classes. The Fund will maintain at least 2% of its NAV in liquid assets. In addition, any active and frequent trading strategy will depend on investment opportunities or valuations.
Strategy on equities and/or equity-related instruments broadly consists of the following:
(i) The portfolio’s asset allocation is determined by the Fund Manager’s macro view. A bo om-up approach in the stock selection will then follow in determining exposure to certain sector(s) or theme(s). This process will include:
• Identi cation of “growth” companies which have competitive advantages to support strong earnings prospects; and
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• Screening for “value” which identi es fundamentally sound companies whose stock prices have yet to re ect such value. These would include those with a ractive valuations relative to their industry peers and those trading at signi cant 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 strength and corporate governance will also be considered. Strategy on fixed income instruments:
• Predominantly in short-term bonds, money market instruments and deposits (excluding structured deposits). The short-term nature of these investments allows the Fund Manager to easily switch to equities during conducive stock market or bullish periods.
• For investment in bonds such as listed/ unlisted debt instruments issued by the Malaysian Government, its agencies, Bank Negara Malaysia (BNM) and Malaysian corporates, the Fund Manager takes a top-down approach for asset allocation and a bo om-up approach for bond selection; looking for bonds with value, investing in bonds a er thorough credit evaluation and identifying the relative market value.
The Fund may invest up to 25% of the Fund’s NAV in foreign equities and/or equity-related instruments of companies which are domiciled in/ listed in/ or have significant operations** in the Asia-Pacific region, including but not limited to Australia, China, Hong Kong, India, Indonesia, Japan, New Zealand, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.
**Significant operations means the revenue, earnings, production facilities, assets and/or investments of a company are based in/ derived from the Asia Pacific region. The level of significance will be determined by the Fund Manager on a case-by-case basis based on his/her research and judgement.
During the six months financial period under review, the average total return of the Fund increased by 16.6%.
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2 MANAGER’S REPORT
2.1 FUND PERFORMANCE
For the six months nancial period ended 30 September 2020, the average total return of the Fund increased by 16.6%. The Fund outperformed its benchmark return, which increased by 8.6% over the same period. The outperformance was due to the overweight in gloves and technology.
The graph below compares the 6-month performance of the Fund against its benchmark return:
Fund Performance vs. Benchmark Index Return 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Mar Apr May Jun Jul Aug Sep 20 20 20 20 20 20 20 Manulife Investment-CM Flexi Fund Return Benchmark Index Return
Source: Bloomberg L.P.
Fund Size
The Fund’s total NAV decreased from RM28.94mil to RM25.36mil as at 30 September 2020.
Fund Returns
(a) The graph below compares the 5-year performance of the Fund against its benchmark return:
Fund Performance vs. Benchmark Index Return 35% 30% 25% 20% 15% 10% 5% 0% -5% Jun-17 Jun-16 Jun-18 Jun-19 Sep-17 Dec-17 Sep-15 Sep-16 Sep-18 Sep-19 Dec-15 Dec-16 Dec-18 Dec-19 Mar-17 Mar-16 Mar-18 Mar-19 Jun-20 Sep-20 Mar-20 Manulife Investment-CM Flexi Fund Return Benchmark Index Return
Source: Bloomberg L.P.
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(b) Average Total Return of the Fund:
Fund Benchmark For the nancial period ended 30 September 2020 (% p.a.) (% p.a.) 1 year (2.77) (0.14) 3 years 0.21 (0.57) 5 years 3.71 1.41 Commencement date: 13 February 2007 Source: Bloomberg L.P
(c) Annual Total Return of the Fund:
Fund Benchmark For the nancial period ended: (% p.a.) (% p.a.) 30 September 2020 (2.77) (0.14) 30 September 2019 (5.46) (3.84) 30 September 2018 9.47 2.36 30 September 2017 15.40 5.07 30 September 2016 3.33 3.83 Commencement date: 13 February 2007 Source: 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 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 100% = [(NAV Return*Series of Income Return)-1] x 100%
NAV Return 100% = {[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) x100 - 100, where n = number of days between beginning and end dates.
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The following table shows other nancial and performance data of the Fund for the past three nancial periods:
Fund Data 30 September 2020 30 September 2019 30 September 2018 NAV (RM) 25,358,840 28,941,063 37,428,923 Units in Circulation (’000) 127,972 131,680 154,280 NAV (RM per unit) 0.1982 0.2198 0.2426 Highest / Lowest NAV 0.2026 / 0.1680 0.2208 / 0.2158 0.2440 / 0.2228 (RM per unit) Total Fund Return (%) 16.59 3.92 3.54 NAV Return (%) 16.59 3.92 3.54 Income Return (%) - - - Management Expenses 0.86 0.86 0.86 Ratio (%) Portfolio Turnover Ratio 1.30 0.76 0.87 (times)
NOTES
(i) Management Expenses Ratio (MER)
MER is computed based on the total fees and recovered expenses excluding transaction costs incurred by the unit trust fund divided by the average unit trust fund size calculated on a daily basis.
Fees of the unit trust fund + Recovered expenses of the unit trust fund x 100 Average value of the unit trust fund calculated on a daily basis
Where:
Fees = All ongoing fees deducted / deductible directly from the unit trust fund in respect of the period covered by the management expenses ratio, expressed as a xed 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 fund;
Recovered = All expenses recovered from/ charged to the unit trust fund, as a expenses result of the expenses incurred by the operation of the unit trust fund, expressed as a xed amount. This should not include expenses that would otherwise be incurred by an individual investor (e.g. brokerage, taxes and levies); and
Average = The NAV of the unit trust fund, including unit trust net income value value of of the fund, less expenses on an accrued basis, in respect of the the unit period covered by the management expenses ratio, calculated on a trust fund daily basis.
The MER for the nancial period remains consistent with the previous nancial period.
(ii) Portfolio Turnover Ratio (PTR)
PTR is computed based on the average sum of the acquisitions and disposals of investments of the unit trust fund for the nancial period divided by the average value of the unit trust fund for the nancial period calculated on a daily basis.
[Total acquistions of the fund for the period + Total disposals of the fund for the period]
Average value of the fund for the year calculated on a daily basis
The PTR for the nancial period is higher than the previous nancial period mainly due to the increase in trading activities.
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The Manager wishes to highlight that past performance of the Fund is not an indication of its 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 nancial periods:
% of Net Asset Value
Sector Allocation 30 September 2020 30 September 2019 30 September 2018
Industrial Products & Services 14.49 9.96 8.92 Consumer Products & Services 10.61 11.65 11.06 Financial Services 10.31 16.20 21.08 Plantation 10.05 4.39 2.77 Technology 9.32 9.57 10.25 Health Care 9.17 6.31 0.98 Utilities 8.67 11.76 7.87 Energy 7.47 3.75 7.40 Transportation & Logistics 3.37 6.22 5.60 Construction 3.01 4.52 2.09 Telecommunications & Media 2.35 6.51 5.20 Property 1.81 0.44 0.20 REITs 0.33 2.33 - Warrant 0.23 - - Quoted Investments – 91.19 83.65 74.50 Local Quoted Investments – - 0.03 0.02 Foreign Total Quoted Investments 91.19 83.68 74.52 Deposits with Licensed 7.95 6.35 16.30 Financial Institutions Other Assets & Liabilities 0.86 - 9.18
% of Net Asset Value
Country Allocation 30 September 2020 30 September 2019 30 September 2018
Malaysia 91.19 93.61 93.42 Indonesia - 0.03 0.02 Total Investments 91.19 93.64 83.44
As at 30 September 2020, the Fund was 91.19% invested in equities, down from 93.64% a year ago.
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2.3 MARKET REVIEW
During the six-month nancial period under review, the FBM KLCI rose 11.4%. The rebound was strong from its March 2020 low as global central banks and governments embarked on aggressive monetary and scal policies.
The FTSE Bursa Malaysia Composite Index (“FBM KLCI”) fell 1.3% in September amid a global equity rout. Nonetheless, it outperformed its regional peers which posted a 6.7% loss in MSCI ASEAN Index. All domestic sub-indices were in the red too except for construction and industrial products. By sector, the market correction was led by healthcare (-11.9%) due to correction of glove stocks on Covid-19 vaccine development news ow, and energy (-10.9%) due to lower crude oil prices.
Over the past month, consensus earnings per share (EPS) trend of FBM KLCI seems to suggest that earnings had bo omed and starts to rise again. This was primarily driven by the sharp positive earnings revision of glove stocks namely Top Glove and Hartalega. Meaningful earnings rebound for other sectors is dependent on continued a ening of Covid-19 cases and the progressive recovery of economy. With the exception of banks which will continue to face asset deterioration risk post loan moratorium in September and tourism-related stocks, the worst is likely over for the rest of the listed companies. A er a period of a ened curve of domestic Covid-19 new cases, a second wave is unravelling especially in Sabah which has now spread to Peninsular Malaysia. An inter-district travel ban has been implemented in Sabah. This will dampen domestic consumption especially domestic retail and tourism spending and the recovery prospect for airlines, airports, and the hospitality industries. Politics will remain a source of uncertainty for the equity market in the near term especially post Sabah-state election.
Following 2 consecutive months of correction, FBM KLCI is currently trading at 2021 price to earnings (PE) of 14.7x vs its 10-year mean of 15.4x. Excluding the glove sector, the FBM KLCI is trading at 2021 PE of 15.4x which suggests that it is fairly valued. However, interest rate has fallen signi cantly since Bank Negara Malaysia (BNM) cut its Overnight Policy Rate (OPR) by 125bps year-to-date (YTD) to 1.75% in response to the Covid-19 pandemic.
2.4 MARKET & ECONOMIC OUTLOOK AND INVESTMENT STRATEGY
We expect the low interest rate environment to be sustained until the economy is on a rmer footing. With such a low interest rate, equity risk premium (ERP) has widened signi cantly to 3.85%, +2 SD over mean of 2.72%. This means that equity valuation is actually very cheap now relative to xed income. We value FBM KLCI at 1,730 for the base case as we peg it to 17.1x PE (which is mid-point between historical mean PE and bull case PE) and it will be back loaded to 2H2021 as we foresee 1Q2021 will still be choppy due to continuous Covid-19 related economic data assessment and macro policy adjustments post US Presidential Election.
We reiterated our cautiousness view on the global market perspective driven by the US Presidential Election. Heighten volatility in the coming months present a good opportunity to position all portfolios for 1H2021. Furthermore, a er two months of market corrections and taking a 3 to 6 months investment horizon, from valuation perspective, FBM KLCI looks a ractive.
We will continue with our high AA of 90-95% and focus more on adding alpha into all portfolios. Sector in focus will be on Technology, Healthcare, Telecommunication and Energy & Commodi- ty-related. We will continue to underweight Banks & Financial Services and reduce our overweight on Plantation.
2.5 BREAKDOWN OF UNIT HOLDINGS BY SIZE AS AT 30 SEPTEMBER 2020
The following table presents the distribution of the Fund’s unit holders according to size of unit holdings:
No. of No. of Units % % Size of Holdings Unit Holders Held (’000) 5,000 and below 129 6.13 430 0.34 5,001 to 10,000 301 14.30 2,292 1.79 10,001 to 50,000 935 44.41 24,283 18.98 50,001 to 500,000 727 34.54 91,388 71.41 Above 500,001 13 0.62 9,579 7.49 Manager’s stock - - - - Total 2,105 100.00 127,972 100.00
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2.6 STATE OF AFFAIRS
NOTIFICATION OF CHANGES
A New Master Prospectus dated 7 February 2020 and First Supplemental Master Prospectus dated 13 November 2020 were issued to make the following general and administrative updates:
• New company name of the Manager; • General and administrative updates such as branches of the Manager; • Inclusion of sales charge for subscription via Employees Provident Fund (EPF) i-Akaun (member); and • Revision to the switching fee applicable to the Fund.
A New Master Prospectus dated 7 February 2020 and First Supplemental Master Prospectus dated 13 November 2020 is available in the company website: www.manulifeinvestment.com.my.
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3 POLICY ON STOCKBROKING REBATES AND SOFT COMMISSIONS
The Management Company did not retain any rebates.
Goods and services (so commissions) may be retained by the Manager or its delegates if the goods and services are of demonstrable bene t to unit holders, and dealings with the brokers/dealers are executed on terms which are the best available for the Fund.
The Manager and its delegates have subscribed but are not limited to the following goods and services which are demonstrably bene cial to unit holders such as Bloomberg, Reuters, Bondweb, Factsheet and Lipper.
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4 STATEMENT BY THE MANAGER
We, Edmond Cheah Swee Leng and Chong Soon Min, being two of the Directors of Manulife Investment Management (M) Berhad (the “Manager”), do hereby state that, in the opinion of the Manager, the unaudited nancial statements comprising the statement of comprehensive income, statement of nancial position, statement of changes in equity, statement of cash ows, summary of signi cant accounting policies and notes to the nancial statements, are drawn up in accordance with the provisions of the Deeds and give a true and fair view of the nancial position of the Fund as at 30 September 2020 and of its nancial performance, changes in equity and cash ows of the Fund for the six months nancial period ended 30 September 2020 in accordance with the Malaysian Financial Reporting Standards (“MFRS”) and the International Financial Reporting Standards (“IFRS”).
For and on behalf of the Manager MANULIFE INVESTMENT MANAGEMENT (M) BERHAD (formerly known as Manulife Asset Management Services Berhad)
EDMOND CHEAH SWEE LENG DIRECTOR
CHONG SOON MIN DIRECTOR
Kuala Lumpur 24 November 2020
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5 TRUSTEE'S REPORT TO THE UNIT HOLDERS OF MANULIFE INVESTMENT-CM FLEXI FUND
We have acted as Trustee for Manulife Investment - CM Flexi Fund (“the Fund”) for the nancial period ended 30 September 2020. To the best of our knowledge, Manulife Investment Management (M) Berhad (formerly known as Manulife Asset Management Services Berhad) (“the Manager”) has managed the Fund in the nancial period under review in accordance with the following:
1. Limitations imposed on the investment powers of the Manager under the deeds, the securities laws and guidelines on Unit Trust Funds;
2. Valuation and pricing of the Fund are carried out in accordance with the deeds and any regulatory requirement; and
3. Creation and cancellation of units are carried out in accordance with the deeds and any regulatory requirements.
For Maybank Trustees Berhad [Company No.: 196301000109 (5004-P)]
JULIA BINTI MUSTAFFA Chief Executive Ocer
Kuala Lumpur 24 November 2020
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6 STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 SEPTEMBER 2020
Note 2020 2019 RM RM
INVESTMENT INCOME Interest income from deposits with licensed nancial institutions at amortised cost 26,885 34,625 Gross dividend income 333,928 454,238 Net gain on nancial assets at fair value through pro t or loss 6 4,067,593 873,862 Net foreign currency exchange gain - 17,993
4,428,406 1,380,718
EXPENSES Manager’s fee 3 200,146 219,962 Trustee’s fee 4 10,674 11,731 Auditors’ remuneration 3,455 3,250 Tax agent’s fee 1,435 1,350 Other expenses 13,786 15,437 Transaction costs 196,440 114,474 425,936 366,204
PROFIT BEFORE TAXATION 4,002,470 1,014,514
TAXATION 5 - (1,193)
PROFIT AFTER TAXATION AND TOTAL COMPREHENSIVE INCOME 4,002,470 1,013,321
Pro t a er taxation is made up as follows:
Realised 493,926 765,215 Unrealised 3,508,544 248,106 4,002,470 1,013,321
The accompanying summary of signi cant accounting policies and notes to the nancial statements form an integral part of these nancial statements.
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7 STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2020
Note 2020 2019 RM RM ASSETS Cash and cash equivalents 7 2,088,483 1,248,893 Financial assets at fair value through pro t or loss 6 23,120,040 27,103,747 Amount due from Manager 35,763 116,388 Amount due from stockbrokers 442,274 403,201 Dividends receivable 62,642 171,420 Tax recoverable - 31,353
TOTAL ASSETS 25,749,202 29,075,002
LIABILITIES
Amount due to Manager - Manager’s fee 31,151 35,495 - Cancellation of units 86,780 13,236 Amount due to Trustee 1,662 1,893 Amount due to stockbrokers 225,300 36,069 Other payables 8 45,469 47,246
TOTAL LIABILITIES 390,362 133,939
NET ASSET VALUE (“NAV”) OF THE FUND 25,358,840 28,941,063
EQUITY
Unit holders’ capital 22,137,120 24,771,221 Retained earnings 3,221,720 4,169,842 25,358,840 28,941,063
NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 2 25,358,840 28,941,063
NUMBER OF UNITS IN CIRCULATION 9 127,971,722 131,680,000
NAV PER UNIT 0.1982 0.2198
The accompanying summary of signi cant accounting policies and notes to the nancial statements form an integral part of these nancial statements.
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8 STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 SEPTEMBER 2020
Unit holders’ Retained capital earning Total RM RM RM
BALANCE AS AT 1 APRIL 2020 23,982,933 (780,750) 23,202,183 Movement in unit holders’ contribution: Creation of units arising from applications 4,212,576 - 4,212,576 Cancellation of units (6,058,389) - (6,058,389)
Total comprehensive income - 4,002,470 4,002,470
BALANCE AS AT 30 SEPTEMBER 2020 22,137,120 3,221,720 25,358,840
Unit holders’ Retained capital earnings Total RM RM RM
BALANCE AS AT 1 APRIL 2019 27,093,556 3,156,521 30,250,077 Movement in unit holders’ contribution: Creation of units arising from applications 7,043,858 - 7,043,858 Cancellation of units (9,366,193) - (9,366,193) Total comprehensive income - 1,013,321 1,013,321
BALANCE AS AT 30 SEPTEMBER 2019 24,771,221 4,169,842 28,941,063
The accompanying summary of signi cant accounting policies and notes to the nancial statements form an integral part of these nancial statements.
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9 STATEMENT OF CASH FLOWS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 SEPTEMBER 2020
Note 2020 2019 RM RM CASH FLOWS FROM OPERATING ACTIVITIES
Purchase of investments (34,820,059) (21,925,880) Sale of investments 35,284,393 22,731,101 Net realised foreign exchange gain - 17,993 Dividends received 513,712 393,489 Interest income received 26,885 34,625 Manager’s fee paid (200,029) (224,011) Trustee’s fee paid (10,675) (11,947) Audit fee paid (7,441) (7,053) Tax agent’s fee paid (3,033) (39,941) Payment for other fees and expenses (6,355) 22,868
Net cash generated from operating activities 777,398 991,244
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from creation of units 4,194,784 6,955,773 Payments for cancellation of units (5,995,133) (9,541,228)
Net cash used in nancing activities (1,800,349) (2,585,455)
Net decrease in cash and cash equivalents (1,022,951) (1,594,211) Cash and cash equivalents at the beginning of the nancial period 3,111,434 2,843,104
Cash and cash equivalents at the end of the nancial period 7 2,088,483 1,248,893
Cash and cash equivalents comprise: Deposits with licensed nancial institutions 2,017,117 493,227 Bank balance in a licensed bank 71,366 755,666 7 2,088,483 1,248,893
The accompanying summary of signi cant accounting policies and notes to the nancial statements form an integral part of these nancial statements.
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10 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 SEPTEMBER 2020
The following accounting policies have been used consistently in dealing with items which are considered material in relation to the nancial statements. The policies have been consistently applied to all the nancial years presented, unless otherwise stated.
A BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS
The unaudited nancial statements of the Fund have been prepared in accordance with the Malaysian Financial Reporting Standards (“MFRS”) and the International Financial Reporting Standards (“IFRS”). The nancial statements have been prepared under the historical cost convention, as modi ed by nancial assets at fair value through pro t or loss.
The preparation of nancial statements in conformity with MFRS and IFRS requires the use of certain critical accounting estimates and assumptions that aect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the nancial statements, and the reported amounts of revenues and expenses during the reported nancial 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 dier. There are no signi cant areas of judgement or complexity that have signi cant eect on the amounts recognised in the nancial statements. There are no critical accounting estimates and assumptions used in the preparation of the nancial statements of the Fund for the six months nancial period ended 30 September 2020.
Standard, amendments to published standards and interpretations that are eective and relevant:
The Fund has applied the following amendments for the rst time for the nancial period beginning on 1 April 2020:
• Amendments to MFRS 112 'Income Taxes' (e ective from 1 January 2019) clarify that where income tax consequences of dividends on nancial instruments classifed as equity is recognised (either in pro t or loss, other comprehensive income or equity) depends on where the past transactions that generated distributable pro ts were recognised.
Accordingly, the tax consequences are recognised in pro t or loss when an entity determines payments on such instruments are distribution of pro ts (that is, dividends). Tax on dividends should not be recognised in equity merely on the basis that it is related to a distribution to owners.
There are no other standards, amendments to standards or interpretations that are eective for annual periods beginning on 1 April 2020 that have a material eect on the nancial statements of the Fund.
Amendments and interpretations which are relavant to the Fund but not yet eective and have not been early adopted are as follows:
Financial period beginning on/a er 1 October 2020
• The Conceptual Framework for Financial Reporting (“Framework”) (eective 1 January 2020).
The Framework was revised with the primary purpose to assist the International Accounting Standards Board (''IASB'') to develop IFRS that are based on consistent concepts and enable preparers to develop consistent accounting policies where an issue is not addressed by an IFRS.
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Key changes include:
• increasing the prominence of stewardship in the objective of nancial reporting; • reinstating prudence as a component of neutrality; • de ning a reporting entity, which may be a legal entity, or a portion of an entity; • revising the de nitions of an asset and a liability; • removing the probability threshold for recognition and adding guidance on derecognition; • adding guidance on dierent measurement basis; and • stating that pro t or loss is the primary performance indicator and that, in principle, income and expenses in other comprehensive income should be recycled where this enhances the relevance or faithful representation of the nancial statements.
No changes will be made to any of the current accounting standards. However, entities that rely on the Framework in determining their accounting policies for transactions, events or conditions that are not otherwise dealt with under the accounting standards will need to apply the revised Framework from 1 October 2020.
B FINANCIAL ASSETS AND FINANCIAL LIABILITIES
(i) Classification
The Fund classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value through profit or loss and • those to be measured at amortised cost
The Fund classifies its investments based on both the Fund’s business model for managing those financial assets and the contractual cash flow characteristics of the financial assets. The portfolio of financial assets is managed and performance is evaluated on a fair value basis. The Fund is primarily focused on fair value information and uses that information to assess the assets’ performance and to make decisions. The Fund has not taken the option to irrevocably designate equity securities as fair value through other comprehensive income. The contractual cash flows of the Fund’s debt securities are solely principal and interest. However, these securities are neither held for the purpose of collecting contractual cash flows nor held both for collecting contractual cash flows and for sale.
The collection of contractual cash flows is only incidental to achieving the Fund’s business model’s objective. Consequently, all investments are measured at fair value through profit or loss.
The Fund classifies cash and cash equivalents, amount due from Manager and dividends receivable as financial assets at amortised cost as these financial assets are held to collect contractual cash flows consisting of the amount outstanding.
The Fund classifies amount due to Manager, amount due to Trustee, other payables as other financial liabilities measured at amortised cost.
(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. Investments are initially recognised at fair value.
Financial liabilities 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.Financial assets are derecognised 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 derecognised when they are extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expired.
Unrealised gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the statement of comprehensive income within net gain or loss on financial assets at fair value through profit or loss in the financial year which they arise.
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Dividend income from nancial assets at fair value through pro t or loss is recognised in the statement of comprehensive income as part of gross dividend income when the Fund’s right to receive payments is established.
Quoted securities in Malaysia are valued at the last done market price quoted on Bursa Malaysia Securities Bhd (“Bursa Securities”) at the date of the statement of nancial position.
Foreign quoted securities are valued at the last traded market price quoted on the respective foreign stock exchanges at the close of the business day of the respective foreign stock exchanges.
If a valuation based on the market price does not represent the fair value of the quoted securities, for example during abnormal market conditions or when no market price is available, including in the event of a suspension in the quotation of the quoted securities for a period exceeding 14 days, or such shorter period as agreed by the Trustee, then the quoted securities are valued as determined in good faith by the Manager, based on the methods or bases approved by the Trustee a er appropriate technical consultation.
Deposits with licensed nancial institutions are stated at cost plus accrued interest calculated on the eective interest method over the period from the date of placement to the date of maturity of the respective deposits.
Financial assets at amortised cost and other nancial liabilities are subsequently carried at amortised cost using the eective interest method.
(iii) Impairment
The Fund measures credit risk and expected credit losses using probability of default, exposure at default and loss given default. Management considers both historical analysis and forward looking information in determining any expected credit loss. Management considers the probability of default to be close to zero as these instruments have a low risk of default and the counterparties have a strong capacity to meet their contractual obligations in the near term. As a result, no loss allowance has been recognised based on 12 months expected credit losses as any such impairment would be wholly insigni cant to the Fund.
(iv) Signi cant increase in credit risk
A signi cant increase in credit risk is de ned by management as any contractual payment which is more than 30 days past due.
(v) De nition of default and credit- impaired nancial assets
Any contractual payment which is more than 90 days past due is considered credit impaired.
(vi) Write-o
The Fund writes o nancial assets, in whole or in part, when it has exhausted all practical recovery eorts and has concluded there is no reasonable expectation of recovery. The assessment of no reasonable expectation of recovery is based on unavaila- bility of debtor’s sources of income or assets to generate sucient future cash ows to repay the amount. The Fund may write o nancial assets that are still subject to enforcement activity. Subsequent recoveries of amounts previously wri en o will result in impairment gains. There are no write-os/recoveries during the nancial year.
C INCOME RECOGNITION
Interest income from deposits placed with licensed nancial institutions is recognised on time proportionate basis using the eective interest rate method on an accrual basis.
Interest income is calculated by applying the eective interest rate to the gross carrying amount of a nancial asset except for nancial assets that subsequently become credit-impaired. For credit-impaired nancial assets the eective interest rate is applied to the net carrying amount of the nancial asset (a er deduction of the loss allowance).
Dividend income on quoted investments is recognised on the ex-dividend date.
Realised gains or losses on disposal of quoted investments is calculated based on the dierence between the net disposal proceeds and the carrying amount of the investments, determined on a weighted average cost basis. 18 MANULIFE INVESTMENT -CM FLEXI FUND
D EXPENSES
Expenses are accounted for on an accrual basis and charged to the statement of comprehensive income. Expenses arising from disposal of investments are recognised as transaction costs (Note J to the nancial statements).
E AMOUNT DUE FROM/TO STOCKBROKERS
Amounts due from and to stockbrokers represent receivables for quoted securities sold and payables for quoted securities purchased that have been contracted for but not yet se led or delivered on the statement of nancial position date respectively.
These amounts are recognised initially at fair value and subsequently measured at amortised cost. At each reporting date, the Fund measures the loss allowance on the amount due from the stockbroker at an amount equal to the lifetime expected credit losses if the credit risk has increased signi cantly since initial recognition. If, at the reporting date, the credit risk has not increased signi cantly since initial recognition, the Fund shall measure the loss allowance at an amount equal to 12-month expected credit losses.
Signi cant nancial diculties of the stockbroker, probability that the stockbroker will enter bankruptcy or nancial reorganisation, and default in payments are all considered indicators that a loss allowance may be required.
If the credit risk increases to the point that it is considered to be credit impaired, interest income will be calculated based on the gross carrying amount adjusted for the loss allowance. A signi cant increase in credit risk is de ned by the Manager as any contractual payment which is more than 30 days past due.
F CASH AND CASH EQUIVALENTS
For the purpose of statement of cash ows, cash and cash equivalents comprise cash at bank and deposits held in highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insigni cant risk of changes in value.
G FUNCTIONAL AND PRESENTATION CURRENCY
Items included in the nancial statements of the Fund are measured using the currency of the primary economic environment in which the Fund operates (the “functional currency”). The nancial statements are presented in Ringgit Malaysia (“RM’’), which is the Fund's functional and presentation currency.
Due to mixed factors in determining the functional currency of the Fund, the Manager has used its judgement to determine the functional currency that most faithfully represents the economic eects of the underlying transactions, events and conditions and have determined the functional currency to be in RM primarily due to the following factors:
(i) Signi cant portion of the Fund's expenses are denominated in RM; (ii) Signi cant portion of the Fund's investments are denominated in RM
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains or losses resulting from the se lement of such transactions and from the translation at nancial year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when deferred in OCI as qualifying cash ow hedges.
H 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 nancial position.
19 MANULIFE INVESTMENT -CM FLEXI FUND
H FAIR VALUE OF FINANCIAL INSTRUMENTS
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 characteris- tics of various nancial instruments, discount rates, estimates of future cash ows and other factors. Changes in the uncertainties and assumptions could materially aect 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 nancial instruments as at the date of statement of nancial position. The total fair value of each nancial instrument is not materially dierent from the total carrying value.
The fair values are based on the following methodologies and assumptions:
(a) Short-term deposits with nancial institutions
For deposits and placements with nancial 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 ows by using prevailing interbank money market interest rates at which similar deposits and placements would be made with nancial institutions of similar credit risk and remaining period to maturity.
(b) Quoted investments
The estimated fair value is based on quoted and observable market prices.
(c) Other short-term nancial instruments
Other short-term nancial instruments comprise amount due from/to Manager, amount due from/to stockbrokers, dividends receivable, 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.
I TAXATION
Current tax expense is determined according to the Malaysian tax laws at the current rate based upon the taxable pro t earned during the nancial period.
J TRANSACTION COSTS
Transaction costs are costs incurred to acquire or dispose of nancial assets or liabilities at fair value through pro t or loss. They include fees and commissions paid to agents, advisors, brokers and dealers. Transaction costs, when incurred, are immediately recognised in the statement of comprehensive income as expenses.
20 MANULIFE INVESTMENT -CM FLEXI FUND
11 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS FINANCIAL PERIOD ENDED 30 SEPTEMBER 2020
1 INFORMATION ON THE FUND
Manulife Investment-CM Flexi Fund (“the Fund”) was established pursuant to a Master Deed dated 31 January 2002, as amended and supplemented by subsequent Supplemen- tal Deeds (hereina er referred to as “the Deed”) between Manulife Investment Management (M) Berhad (formerly known as 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 de ned 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 nancial institutions, quoted and unquoted xed 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 apprecia- tion.
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 and private retirement schemes, fund management activities and nancial planning.
The nancial statements were authorised for issue by the Manager on 24 November 2020.
2 NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS
The unit holders’ contributions to the Fund meet the criteria to be classi ed as equity instruments under MFRS 132 “Financial Instruments: Presentation”. Those criteria include:
• the units entitle the holder to a proportionate share of the Fund’s net asset value; • the units are the most subordinated class and class features are identical; • there is no contractual obligations to deliver cash or another nancial asset other than the obligation on the Fund to repurchase; and • the total expected cash ows from the units over its life are based substantially on the pro t or loss of the Fund.
The outstanding units are carried at the redemption amount that is payable at each nancial period if the unit holders exercise the right to put the units back to the Fund.
Units are created and cancelled at prices based on the Fund’s net asset value per unit at the time of creation or cancellation. The Fund’s net asset value per unit is calculated by dividing the net assets a ributable to unit holders with the total number of outstanding units.
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 (2019:1.50% 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 (2019: 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.
There will be no further liability to the Trustee in respect of Trustee’s fee other than the amount recognised above. 21 MANULIFE INVESTMENT -CM FLEXI FUND
5 TAXATION 2020 2019 RM RM
Current taxation - 1,193
Numerical reconciliation between pro t before taxation multiplied by the Malaysian statutory tax rate and tax expenses of the Fund is as follows:
2020 2019 RM RM
Pro t before taxation 4,002,470 1,014,514
Tax calculated at Malaysian tax rate of 24% (2019: 24%) 960,593 243,483
Tax eect in respect of: - Expenses not deductible for tax purposes 52,110 33,126 - Restriction on tax deductible expenses 50,115 54,763 - Investment income not subject to tax (1,061,648) (324,324) - Investment (loss)/income subject to dierent tax rate (1,170) (5,854)
Tax expenses - 1,193
6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30.09.2020 30.09.2019 RM RM Financial assets at fair value through pro t or loss - Quoted investments - Local (Note 6(a)) 23,120,040 27,093,858 - Quoted investments - Foreign (Note 6(b)) - 9,889 23,120,040 27,103,747
2020 2019 RM RM Net gain on nancial assets at fair value through pro t or loss - Realised 559,050 625,756 - Unrealised 3,508,543 248,106 4,067,593 873,862
22 MANULIFE INVESTMENT -CM FLEXI FUND
Fair value as at 30.09.2020 expressed as Fair value percentage Cost of as at of value of QUOTED INVESTMENTS Quantity shares 30.09.2020 Fund Units RM RM % 30.09.2020 ACE MARKET
HEALTH CARE
Optimax Holdings Sdn Bhd 608,400 203,182 483,678 1.91
INDUSTRIAL PRODUCTS & SERVICES
Solarvest Holdings Berhad 218,600 305,510 266,692 1.05
TECHNOLOGY
Greatec Technology Berhad 42,800 175,215 290,612 1.15 I-Stone Group Berhad 2,270,800 547,514 465,514 1.83 JHM Consolidation Berhad 164,800 221,976 278,512 1.10 2,478,400 944,705 1,034,638 4.08
MAIN MARKET
CONSTRUCTION
Econpile Holdings Berhad 187,900 122,666 91,132 0.36 Gamuda Berhad 14,680 52,159 51,233 0.20 IJM Corporation Berhad 340,700 456,605 490,608 1.94 Kerjaya Prospek Group Berhad 129,987 170,099 129,987 0.51 673,267 801,529 762,960 3.01
CONSUMER PRODUCTS & SERVICES DRB-Hicom Berhad 380,800 719,662 795,872 3.14 Genting Malaysia Berhad 282,900 682,845 588,432 2.32 Genting Berhad 140,600 539,477 447,108 1.76 Sime Darby Berhad 345,100 737,508 859,299 3.39 1,149,400 2,679,492 2,690,711 10.60
ENERGY
Dayang Enterprise Holdings Berhad 706,000 919,076 691,880 2.73 Dialog Group Berhad 81,500 247,429 310,515 1.22 Hibiscus Petroleum Berhad 1,277,700 807,423 645,239 2.54 Yinson Holdings Berhad 44,000 273,758 246,400 0.98 2,109,200 2,247,686 1,894,034 7.47
FINANCIAL SERVICES
Bursa Malaysia Bhd 32,300 327,133 273,904 1.08 Hong Leong Bank Berhad 25,500 405,398 383,520 1.51 Hong Leong Financial Group Berhad 10,700 162,944 152,796 0.60 Malayan Banking Berhad 98,433 831,632 710,686 2.80 Public Bank Berhad 37,900 629,283 595,030 2.35 RHB Bank Berhad 109,200 607,837 499,044 1.97 314,033 2,964,227 2,614,980 10.31
23 MANULIFE INVESTMENT -CM FLEXI FUND
Fair value as at 30.09.2020 expressed as Fair value percentage Cost of as at of value of QUOTED INVESTMENTS Quantity shares 30.09.2020 Fund Units RM RM %
HEALTH CARE
Hartalega Holdings Berhad 64,300 934,886 1,041,660 4.11 IHH Healthcare Berhad 25,000 140,831 130,000 0.51 Kossan Rubber Industries Berhad 10,500 111,521 143,640 0.57 Top Glove Corporation Berhad 63,200 469,603 524,560 2.07 163,000 1,656,841 1,839,860 7.26
INDUSTRIAL PRODUCTS & SERVICES Cahya Mata Sarawak Berhad 32,600 53,281 40,098 0.16 UEM Edgenta Berhad 61,700 130,196 125,251 0.49 Kelington Group Berhad 430,300 486,791 524,966 2.07 Petronas Chemicals Group Berhad 154,800 1,013,682 868,428 3.42 Press Metal Aluminium Holdings Berhad 191,000 889,337 981,740 3.87 SKP Resources Berhad 190,900 327,906 353,165 1.39 Sunway Berhad 62,229 103,793 85,254 0.34 VS Industry Berhad 188,700 284,124 428,349 1.69 1,312,229 3,289,110 3,407,251 13.43
PLANTATION
FGV Holdings Berhad 452,200 563,888 520,030 2.05 Kuala Lumpur Kepong Berhad 38,400 823,418 875,520 3.45 Sime Darby Plantation Berhad 228,300 1,118,796 1,152,915 4.55 718,900 2,506,102 2,548,465 10.05
PROPERTY
Sime Darby Property Berhad 178,900 136,293 103,762 0.41 S P Setia Berhad 250,300 203,130 192,731 0.76 UOA Development Berhad 101,000 166,897 161,600 0.64 530,200 506,320 458,093 1.81
REAL ESTATE INVESTMENT TRUST (''REIT'')
Axis Real Estate Investment Trust 38,900 66,908 84,024 0.33
TECHNOLOGY
Inari Amertron Berhad 72,300 122,594 164,844 0.65 MI Technovation Berhad 80,900 316,211 339,780 1.34 Pentamaster Corporation Berhad 46,200 146,171 221,760 0.87 Vitrox Corporation Berhad 49,300 344,670 601,460 2.37 248,700 929,646 1,327,844 5.24
TELECOMMUNICATIONS & MEDIA
Maxis Berhad 100,700 525,239 511,556 2.02 Telekom Malaysia Berhad 20,200 77,049 83,426 0.33 120,900 602,288 594,982 2.35
24 MANULIFE INVESTMENT -CM FLEXI FUND
Fair value as at 30.09.2020 expressed as Fair value percentage Cost of as at of value of QUOTED INVESTMENTS Quantity shares 30.09.2020 Fund Units RM RM % TRANSPORTATION & LOGISTICS
Malaysia Airport Holdings Berhad 112,800 596,842 534,672 2.11 MISC Berhad 42,600 329,876 319,500 1.26 155,400 926,718 854,172 3.37
TSR/WARRANTS
Gamuda Berhad 894,265 342,889 58,127 0.23
UTILITIES
Malako Corporation Berhad 512,300 508,844 484,123 1.91 Taliworks Corporation Berhad 135,900 114,132 114,156 0.45 Tenaga National Berhad 152,500 2,091,779 1,601,250 6.31 800,700 2,714,755 2,199,529 8.67
TOTAL QUOTED INVESTMENTS - LOCAL 12,534,494 23,687,908 23,120,040 91.19
ACCUMULATED UNREALISED LOSS ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (567,868)
TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 23,120,040
Fair value as at 30.09.2019 expressed as Fair value percentage Cost of as at of value of QUOTED INVESTMENTS Quantity shares 30.09.2019 Fund Units RM RM % 30.09.2019 ACE MARKET
TECHNOLOGY
Greatech Technology Berhad 520,500 594,117 780,750 2.70 I-Stone Group Berhad 3,100,000 587,422 542,500 1.87 JHM Consolidation Berhad 59,400 71,066 73,062 0.25 Revenue Corporate Berhad 239,800 339,686 354,904 1.23 3,919,700 1,592,291 1,751,216 6.05
MAIN MARKET
CONSTRUCTION
Gamuda Berhad 244,800 869,073 905,760 3.13 Kerjaya Prospek Group Berhad 202,400 275,393 271,216 0.94 Sunway Construction Group Berhad 63,400 136,101 129,970 0.45 510,600 1,280,567 1,306,946 4.52
25 MANULIFE INVESTMENT -CM FLEXI FUND
Fair value as at 30.09.2019 expressed as Fair value percentage Cost of as at of value of QUOTED INVESTMENTS Quantity shares 30.09.2019 Fund Units RM RM %
CONSUMER PRODUCTS & SERVICES Aeon Co. (M) Berhad 256,800 412,289 374,928 1.29 Bermaz Auto Berhad 266,400 642,401 607,392 2.10 Carlsberg Brewery Malaysia Berhad 14,300 314,487 375,518 1.30 Genting Malaysia Berhad 34,700 108,469 105,141 0.36 Genting Berhad 58,300 542,991 334,642 1.16 MBM Resources Berhad 156,000 629,320 616,200 2.13 Petronas Dagangan Berhad 13,700 364,391 323,320 1.12 Sime Darby Berhad 282,500 651,111 635,625 2.19 1,082,700 3,665,459 3,372,766 11.65
ENERGY
Dayang Enterprise Holdings Berhad 22,500 29,108 37,800 0.13 Dialog Group Berhad 261,000 792,379 887,400 3.07 Yinson Holdings Berhad 23,900 108,184 159,413 0.55 307,400 929,671 1,084,613 3.75
FINANCIAL SERVICES
BIMB Holdings Berhad 72,500 303,853 287,100 0.99 CIMB Group Holdings Berhad 235,807 1,270,920 1,186,109 4.10 Hong Leong Bank Berhad 30,300 568,666 495,708 1.71 Hong Leong Financial Group Berhad 9,300 173,834 151,218 0.52 Malayan Banking Berhad 200,533 1,812,347 1,706,536 5.90 RHB Bank Berhad 152,800 834,891 861,792 2.98 701,240 4,964,511 4,688,463 16.20
HEALTH CARE
Hartalega Holdings Berhad 70,400 348,535 369,600 1.28 IHH Healthcare Berhad 135,100 760,779 767,368 2.65 Top Glove Corporation Berhad 154,700 722,094 688,415 2.38 360,200 1,831,408 1,825,383 6.31
INDUSTRIAL PRODUCTS & SERVICES Cahya Mata Sarawak Berhad 96,400 292,111 260,280 0.90 Petronas Chemicals Group Berhad 207,700 1,689,932 1,566,058 5.41 Press Metal Aluminium Holdings Berhad 124,800 609,223 594,048 2.05 Sunway Berhad 188,841 309,075 324,807 1.12 Uchi Technologies Berhad 49,300 134,091 138,533 0.48 667,041 3,034,432 2,883,726 9.96
PLANTATION
Genting Plantations Berhad 6,100 61,495 60,451 0.21 IOI Corporation Berhad 137,800 633,756 610,454 2.11 Kuala Lumpur Kepong Berhad 18,400 454,870 424,672 1.47 Sime Darby Plantation Berhad 37,100 183,183 175,483 0.60 199,400 1,333,304 1,271,060 4.39
26 MANULIFE INVESTMENT -CM FLEXI FUND
Fair value as at 30.09.2019 expressed as Fair value percentage Cost of as at of value of QUOTED INVESTMENTS Quantity shares 30.09.2019 Fund Units RM RM % PROPERTY
LBS Bina Group Berhad 75,340 82,874 51,985 0.18 Malaysian Resources Corporation Berhad 102,100 87,649 75,044 0.26 177,440 170,523 127,028 0.44
REAL ESTATE INVESTMENT TRUST (''REIT'')
IGB Real Estate Investment Trust 331,200 623,381 675,648 2.33
TECHNOLOGY
Globetronics Technology Berhad 85,433 193,878 175,992 0.61 Malaysian Paci c Industries Berhad 32,100 395,356 293,394 1.01 Vitrox Corporation Berhad 73,100 511,566 549,712 1.90 190,633 1,100,800 1,019,098 3.52
TELECOMMUNICATIONS & MEDIA
Astro Malaysia Holdings Berhad 214,600 311,170 313,316 1.08 Axiata Group Berhad 201,800 910,448 867,740 3.00 DiGi.Com Berhad 148,200 711,054 703,950 2.43 564,600 1,932,672 1,885,006 6.51
TRANSPORTATION & LOGISTICS
Malaysia Airport Holdings Berhad 100,000 893,770 865,000 2.99 MISC Berhad 81,300 535,286 634,140 2.19 Westports Holdings Berhad 73,000 274,414 301,490 1.04 254,300 1,703,470 1,800,630 6.22
UTILITIES
Petronas Gas Berhad 16,200 265,645 265,356 0.92 Ranhill Holding Berhad 200,000 281,320 240,000 0.83 Talworks Corporation Berhad 275,500 253,988 256,215 0.89 Tenaga National Berhad 193,600 2,690,340 2,640,704 9.12 685,300 3,491,293 3,402,275 11.76
TOTAL QUOTED INVESTMENTS - LOCAL 9,951,754 27,653,782 27,093,858 93.61
27 MANULIFE INVESTMENT -CM FLEXI FUND
(b) QUOTED INVESTMENTS - FOREIGN Fair value as at 30.09.2019 expressed as Fair value percentage Cost of as at of value of QUOTED INVESTMENTS Quantity shares 30.09.2019 Fund Units RM RM % INDONESIA
FINANCIALS
Bank Cimb Niaga Tbk PT 33,345 - 9,889 0.03
TOTAL QUOTED INVESTMENTS - FOREIGN 33,345 - 9,889 0.03
TOTAL QUOTED INVESTMENTS 9,985,099 27,653,782 27,103,747 93.64
ACCUMULATED UNREALISED LOSS ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (550,035)
TOTAL FAIR VALUE OF FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 27,103,747
7 CASH AND CASH EQUIVALENTS
30.09.2020 30.09.2019 RM RM
Deposits with licensed nancial institutions 2,017,117 493,227 Bank balances in licensed banks 71,366 755,666 2,088,483 1,248,893
Weighted average rates of return are as follows: 30.09.2020 30.09.2019 % % Short-term deposits with licensed nancial institutions 1.75 3.18
The deposits have an average maturity of 2 days (30.09.2019: 1 day).
8 OTHER PAYABLES 30.09.2020 30.09.2019 RM RM
Auditors’ remuneration 2,934 2,697 Tax agent’s fee 33,797 1,086 Sundry payables and accruals 8,738 43,463 45,469 47,246
28 MANULIFE INVESTMENT -CM FLEXI FUND
9 UNITS IN CIRCULATION
30.09.2020 30.09.2019 No. of units No. of units
At beginning of the nancial period 136,390,839 143,050,000 Add: Creation of units arising from applications 22,533,706 31,850,000 Less: Cancellation of units (30,952,823) (43,220,000)
At end of the nancial period 127,971,722 131,680,000
10 BROKERS’ TRANSACTIONS
The details of transactions with brokers by value of trades are as follows: Percentage Percentage of total Value of of total Brokerage brokerage Name of brokers trades trades fees fee RM RM RM % 2020
UBS Securities Malaysia Sdn Bhd 8,103,932 11.70 10,599 8.06 Macquarie Capital Securities (Malaysia) Sdn Bhd 7,965,065 11.50 16,069 12.22 JP Morgan Securities (M) Sdn Bhd 7,770,959 11.22 10,483 7.97 Maybank Investment Bank Berhad 7,149,118 10.32 14,117 10.74 CGS-CIMB Securities (Malaysia) Sdn Bhd 6,850,203 9.89 12,219 9.30 An Hwang Investment Bank Berhad 6,671,715 9.62 17,468 13.29 RHB Investment Bank Berhad 6,527,021 9.42 14,784 11.25 Credit Suisse Securities (Malaysia) Sdn Bhd 6,515,302 9.40 11,510 8.76 Hong Leong Investment Bank Berhad 5,857,552 8.45 13,228 10.06 CLSA Securities Malaysia Sdn Bhd 4,202,224 6.07 7,203 5.48 Others 1,672,388 2.41 3,774 2.87 69,285,479 100.00 131,454 100.00
2019
CLSA Securities Malaysia Sdn Bhd 6,184,969 13.97 8,893 11.86 Macquarie Capital Securities (Malaysia) Sdn Bhd 5,301,047 11.98 8,162 10.88 Maybank Investment Bank Berhad 4,560,775 10.30 9,637 12.85 JPMorgan Securities (M) Sdn Bhd 4,210,715 9.51 6,137 8.18 RHB Investment Bank Bhd 3,989,679 9.01 8,985 11.98 UBS Securities Malaysia Sdn Bhd 3,406,418 7.70 2,465 3.29 CIMB Investment Bank Bhd 2,473,348 5.59 4,267 5.69 Credit Suisse Securities (Malaysia) Sdn Bhd 2,453,286 5.54 3,083 4.11 Standard Chartered Securities (Singapore) Pte Ltd 2,127,952 4.81 2,701 3.60 An Hwang Investment Bank Berhad 1,971,816 4.46 4,436 5.91 Others 7,582,579 17.13 16,243 21.65 44,262,584 100.00 75,009 100.00
As at the end of each nancial period, there were no transactions with related parties.
29 MANULIFE INVESTMENT -CM FLEXI FUND
11 UNITS HELD BY THE MANAGER AND PARTIES RELATED TO THE MANAGER
The related parties and their relationship with the Fund are as follows:
Related parties Relationship Manulife Investment Management (M) Berhad The Manager Manulife Financial Corporation (“Manulife”) Ultimate holding company of the Manager Manulife Holdings Berhad Immediate holding company of the Manager Subsidiaries and associates of Manulife Subsidiaries and associate companies of the as disclosed in its nancial statements ultimate holding company of the Manager Directors of Manulife Investment Directors of the Manager Management (M) Berhad Subsidiaries and associate companies of the Subsidiaries and associates of Manulife ultimate holding company of the Manager as disclosed in its nancial statements
Units held by the Manager:
MANAGER MANULIFE INVESTMENT MANAGEMENT (M) BERHAD * As at: No. of units RM
30.09.2020 - -
30.09.2019 61,316 13,477
* The units are held legally and bene cially
In addition to the related party disclosure mentioned elsewhere in the nancial statements, there were no other signi cant related party transactions and balances.
The Manager is of the opinion that all transactions with the related companies have been entered into at agreed terms between the related parties.
12 MANAGEMENT EXPENSES RATIO (“MER”)
2020 2019 % % MER 0.86 0.86
MER represents expenses including Manager’s fee, Trustee’s fee, auditors’ remuneration, tax agent’s fee and other expenses (excluding SST on transaction costs and withholding tax) expressed as an annual percentage of the Fund’s average net asset value calculated on a daily basis.
13 PORTFOLIO TURNOVER RATIO (“PTR”)
2020 2019
PTR (times) 1.30 0.76
PTR represents the average of total acquisitions and disposals of investments in the Fund for the nancial period over the Fund’s average net asset value calculated on a daily basis.
30 MANULIFE INVESTMENT -CM FLEXI FUND
14 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Fund is exposed to a variety of risks which include market risk (including price risk, interest rate risk and currency risk), credit risk, liquidity risk and capital risk.
Financial risk management is carried out through internal control processes adopted by the Manager and adherence to all rules and regulations as stipulated by the Securities Commission’s Guidelines on Unit Trust Funds.
Market risk
(a) Price risk
Price risk arises mainly from uncertainty about future prices of investments. It represents the potential loss the Fund may suer through holding market positions in the face of price movements. The Manager manages the risk of unfavourable changes in prices by continuous monitoring of the performance and risk pro le of the investment portfolio.
The table below shows the assets of the Fund which are exposed to price risk.
30.09.2020 30.09.2019 RM RM Financial assets at fair value through pro t or loss - Quoted investments - Local 23,120,040 27,093,858 - Quoted investments - Foreign - 9,889 23,120,040 27,103,747
The table below summarises the sensitivity of the Fund’s pro t or loss a er taxation and net asset value to price risk movements of quoted investments. The analysis is based on the assumptions that the market price of quoted investments uctuates by 5% with all other variables being held constant, and that fair value of the Fund’s investments moved according to the historical correlation of the index. Disclosures below are shown in absolute terms, changes and impact could be positive or negative.
Impact on Changes in pro t or loss Impact on net As at: price a er tax asset value % RM RM 30.09.2020
Financial assets at fair value through pro t or loss - Quoted investments - Local 5 1,156,002 1,156,002
30.09.2019
Financial assets at fair value through pro t or loss - Quoted investments - Local 5 1,354,693 1,354,693 - Quoted investments - Foreign 5 494 494 1,355,187 1,355,187
31 MANULIFE INVESTMENT -CM FLEXI FUND
(b) Interest rate risk
Interest rate risk is the risk that the value of a nancial instrument will uctuate due to changes in market interest rate.
The Fund’s exposure to the interest rate risk is mainly con ned to deposits with nancial institutions. The Manager overcomes this exposure by way of maintaining deposits on short-term basis. Therefore, the Fund's exposure to interest rate ucturation is minimal.
(c) Currency risk
For investments denominated in foreign currencies, the currency risk may have a signi cant impact on the returns of the Fund. The Manager will evaluate the likely direction of a foreign currency versus Ringgit Malaysia based on consideration of economic fundamentals such as interest rate dierentials, balance of payment position, debt level and technical consideration.
The Fund’s foreign currency risk concentration is as follows:
Financial assets at fair value through As at pro t of loss Total RM RM 30.09.2020
IDR - -
30.09.2019
IDR 9,889 9,889
The table below summarises the sensitivity of the Fund’s pro t or loss a er tax and net asset value to changes in foreign exchange movements at the end of each reporting period. The analysis is based on the assumption that the foreign exchange rate uctuates by 5%, with all other variables remaining constant. This represents management’s best estimate of a reasonable possible shi in the foreign exchange rate, having regard to historical volatility of this rate. Disclosures below are shown in absolute terms, changes and impacts could be positive or negative.
Changes in Impact on Impact foreign pro t or loss on net As at exchange a er tax asset value % RM RM 30.09.2019
IDR 5 494 494
As at 31 August 2020, there was no exposure to foreign currency risk.
32 MANULIFE INVESTMENT -CM FLEXI FUND
Credit risk
Credit risk is the risk that one party to a nancial instrument will cause a nancial loss to the other party by failing to discharge an obligation. The Manager manages the credit risk by undertaking credit evaluation to minimise such a risk.
Credit risk arising from placement of deposits in licensed nancial institutions is managed by ensuring that the Fund will only place deposits in reputable licensed nancial institutions.
For amount due from stockbrokers, the se lement terms are governed by the relevant rules and regulations as prescribed by Bursa Malaysia Berhad or respective foreign stock exchanges.
The se lement terms of the proceeds from the creation of units receivable by the Manager are governed by the Securities Commission’s Guidelines on Unit Trust Funds.
The maximum exposure to credit risk before any credit enhancements in the carrying amount of the nancial assets is as set out below:
Neither Past Due Nor Impaired
Cash and Amount Amount cash due from due from Dividends As at equivalents Manager stockbrokers receivable Total RM RM RM RM RM 30.09.2020
AAA 2,088,483 - - - 2,088,483 Not rated - 35,763 442,274 62,642 540,679 2,088,483 35,763 442,274 62,642 2,629,162
30.09.2019
AAA 1,248,893 - - - 1,248,893 Not rated - 116,388 403,201 171,420 691,009 1,248,893 116,388 403,201 171,420 1,939,902
Liquidity risk
Liquidity risk is the risk that the Fund will encounter diculty in meeting its nancial obligations. The Manager manages this risk by maintaining a sucient level of liquid assets to meet anticipated payments and cancellations of units by unit holders. The liquid assets comprise cash at bank, deposits with licensed nancial institutions and other instruments which are capable of being converted into cash within 7 days.
The following table analyses the Fund’s nancial assets and nancial liabilities into relevant maturity groupings based on the remaining period at the statement of nancial position date to the contractual maturity date. The amounts in the following table are the contractual undiscounted cash ows.
33 MANULIFE INVESTMENT -CM FLEXI FUND
No Within one maturity year date Total As at RM RM RM 30.09.2020
Financial assets
Cash and cash equivalents 2,017,117 71,366 2,088,483 Financial assets at fair value through pro t or loss - 23,120,040 23,120,040 Amount due from Manager 35,763 - 35,763 Amount due from stockbrokers 442,274 - 442,274 Dividends receivable 62,642 - 62,642 2,557,796 23,191,406 25,749,202
Financial liabilities
Amount due to Manager - Manager’s fee 31,151 - 31,151 - Cancellation of units 86,780 - 86,780 Amount due to Trustee 1,662 - 1,662 Amount due to stockbrokers 225,300 - 225,300 Other payables 45,469 - 45,469 390,362 - 390,362
As at
30.09.2019
Financial assets
Cash and cash equivalents 493,227 755,666 1,248,893 Financial assets at fair value through pro t or loss - 27,103,747 27,103,747 Amount due from Manager 116,388 - 116,388 Amount due from stockbrokers 403,201 - 403,201 Dividends receivable 171,420 - 171,420 1,184,236 27,859,413 29,043,649
Financial liabilities
Amount due to Manager - Manager’s fee 35,495 - 35,495 - Cancellation of units 13,236 - 13,236 Amount due to Trustee 1,893 - 1,893 Amount due to stockbrokers 36,069 - 36,069 Other payables 47,246 - 47,246 133,939 - 133,939
34 MANULIFE INVESTMENT -CM FLEXI FUND
Capital risk
The capital of the Fund is represented by equity consisting of unit holders’ capital of RM22,137,120 (30.09.2019: RM24,771,221) and retained earnings of RM3,221,720 (30.09.2019: RM4,169,842). The amount of equity can change signi cantly on a daily basis as the Fund is subject to daily subscriptions and redemptions at the discretion of unit holders. The Fund’s objective when managing capital is to safeguard the Fund’s ability to continue as a going concern in order to provide returns for unit holders and bene ts for other stakeholders, and to maintain a strong capital base to support the development of the investment activities of the Fund.
Fair value estimation
The Fund classi es fair value measurements using a fair value hierarchy that re ects the signi cance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset and liability that are not based on observable market data (that is, unobservable inputs) (level 3).
Financial assets at fair value through pro t or loss consisting of RM23,120,040 (30.09.2019: RM27,103,747 ) is classi ed within level 1.
15 SIGNIFICANT EVENT DURING THE FINANCIAL PERIOD
The worsening macro-economic outlook as a result of the Covid-19 pandemic, both domestically and globally, could result in a deterioration of the Fund's net asset value per unit in the future.
The Manager is monitoring the situation closely and will be actively managing the portfolio to achieve the Fund's objective.
35 MANULIFE INVESTMENT -CM FLEXI FUND
12 CORPORATE INFORMATION
MANAGER Manulife Investment Management (M) Berhad (Formerly known as Manulife Asset Management Services Berhad) Registration No.: 200801033087 (834424-U) 13th Floor, Menara Manulife No. 6, Jalan Gelenggang Damansara Heights 50490 Kuala Lumpur
BOARD OF DIRECTORS Dato’ Md Agil Bin Mohd Na (Independent) Edmond Cheah Swee Leng (Independent) Gianni Fiacco (Non-Independent) Vibha Hamsi Coburn (Non-Independent) Wong Boon Choy (Non-Independent) Chong Soon Min (Jason) (Non-Independent Executive)
INVESTMENT COMMITTEE Dato’ Dr Zaha Rina Binti Zahari (Independent) Dato’ Md Agil Bin Mohd Na (Independent) Edmond Cheah Swee Leng (Independent) Wong Boon Choy (Non-Independent) Chong Soon Min (Jason) (Non-Independent)
INVESTMENT MANAGER Manulife Investment Management (M) Berhad (Formerly known as Manulife Asset Management Services Berhad) Registration No: 200801033087 (834424-U) 10th Floor, Menara Manulife No. 6, Jalan Gelenggang Damansara Heights 50490 Kuala Lumpur
TRUSTEE OF THE FUND Maybank Trustees Berhad Registration No.: 196301000109 (5004-P) 8th Floor, Menara Maybank 100 Jalan Tun Perak 50050 Kuala Lumpur
AUDITORS PricewaterhouseCoopers PLT Registration No: LLP0014401-LCA & AF 1146 Level 10, 1 Sentral, Jalan Travers Kuala Lumpur Sentral P O Box 10192 50706 Kuala Lumpur
TAX CONSULTANTS Deloi e Tax Services Sdn Bhd Registration No: 197701005407 (36421-T) Level 16, Menara LGB 1, Jalan Wan Kadir Taman Tun Dr Ismail 60000 Kuala Lumpur
36 MANULIFE INVESTMENT -CM FLEXI FUND
HEAD OFFICE Manulife Investment Management (M) Berhad (Formerly known as Manulife Asset Management Services Berhad) Registration No.: 200801033087 (834424-U) 13th Floor, Menara Manulife No. 6, Jalan Gelenggang Damansara Heights 50490 Kuala Lumpur Tel: (03) 2719-9228 Fax: (03) 2094-7654 E-mail : MY [email protected] Website: www.manulifeinvestment.com.my
BRANCH OFFICES
Kota Bharu 1st Floor, Lot 10900 Wisma Seri Setia Jalan Dusun Muda, Sek 26 15200 Kota Bharu Kelantan Tel: (09) 747-2388 Fax: (09) 747-2588
Sungai Petani Lot 88, No. 17, 2nd Floor Jalan Perdana Heights 2/2 Perdana Heights 08000 Sungai Petani Kedah Darul Aman Tel: (04) 423-3233 Fax: (04) 423-3233
Penang 1-2-18, Elit Avenue, Jalan Mayang Pasir 3, 11950 Bayan Baru, Penang Tel: (04) 611-9944 / 618-0044 Fax: (04) 618-0505
Ipoh No. 1, 1A & 1B Pusat Perdagangan Canning 2 Pusat Perdagangan Canning 31400 Ipoh Perak Darul Ridzuan Tel: (05) 541-6839 Fax: (05) 541-6627
Dataran Sunway 26-2 & 28-2, Jalan PJU 5/8 Dataran Sunway Kota Damansara 47810 Petaling Jaya Selangor Darul Ehsan Tel: (03) 6140-8101 / 6140-8102 Fax: (03) 6140-8103
Shah Alam 30-1, Block 5, Jalan Setia Prima (S) U13/S, Setia Alam, Seksyen U13, 40170 Shah Alam Selangor Darul Ehsan Tel: (03) 3362-6668 Fax: (03) 3362-6662
37 MANULIFE INVESTMENT -CM FLEXI FUND
Klang No. 3-1 & 3-2, Jalan Mahogani 5/K507, Bandar Botanic, 41200 Klang Selangor Darul Ehsan Tel: (03) 3318-6088 Fax: (03) 3318-4011
Kuala Lumpur 2nd Floor, Menara Manulife No. 6, Jalan Gelenggang Damansara Heights 50490 Kuala Lumpur Tel: (03) 2719-9204
Seremban 160-2, Taipan Senawang Jalan Taman Komersil Senawang 1 Taman Komersil Senawang 70450 Seremban Negeri Sembilan Tel: (06) 671-5019 Fax: (06) 678-0016
Melaka No. 87-01 & 87-02 Jalan Melaka Raya 25 Taman Melaka Raya 1 75000 Melaka Tel: (06) 281-3866 Fax: (06) 282-0587
Johor Bahru No. 1-01, Jalan Setia Tropika 1/15 Taman Setia Tropika 81200 Johor Bahru Johor Darul Takzim Tel: (07) 234-5871 Fax: (07) 234-4620
Kuching No. 63 & 65, 2nd Floor Jalan Tun Jugah 93350 Kuching Sarawak Tel: (082) 593-380 Fax: (082) 593-382
Miri Lot. 3554, 1st & 2nd Floor Block 5 MCLD Jalan Miri Pujut 101 Commercial Centre 98000 Miri Sarawak Tel: (085) 325-770 Fax: (085) 326-262
Bintulu No. 2, Lot 3288 1st Floor Parkcity Commerce Square Jalan Tun Ahmad Zaidi 97000 Bintulu Sarawak Tel: (086) 343-288 Fax: (086) 343-289
38 MANULIFE INVESTMENT -CM FLEXI FUND
Sibu No. 1 & 3, 1st Floor, Lorong 1, Jalan Tun Abang Haji Openg 96000 Sibu Sarawak Tel: (084) 320-469 Fax: (084) 320-476
Kota Kinabalu Lot J-55-2, Block J, 2nd Floor, Signature Oce, KK Times Square, O Jalan Coastal Highway, 88100 Kota Kinabalu Sabah Tel: (088) 486-671 / 486-672 Fax: (088) 486-670
Sandakan Taman Nasalim Shoplot Lot 88, 1st Floor, Phase 7A Jalan Lintas Utara 90000 Sandakan Sabah Tel: (089) 220-220 / 229-045 Fax: (089) 226-868
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