Example of Investment Analysis (School Project)

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NEW ERA UNIVERSITYNo. 9 Central Avenue, New Era, Quezon City

PROJECT IN FINANCE 7Investment Analysis

Submitted to:

Prof. Mananghaya

Submitted by:

Arlyn A. Dagoy

MW 2:30-4:00pmRm. 413 3BF1

March 1, 2010 Monday

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TABLE OF CONTENTS

A. INVESTMENT ANALYSIS 3 I. COMPANY PROFILE 3 a. NATURE OF THE BUSINESS

b. ORGANIZATION OF THE BUSINESS c. VISION AND VALUES d. PRODUCTS AND SERVICES e. SUBSIDIARY f. CORPORATE GOVERNANCE g. STOCK EXCHANGE WHERE THE STOCK LISTED

33459

1015

II. ANALYSIS OF THE COMPANY a. RATIO ANALYSIS

a.1. PROFITABILITY a.2. LIQUIDITY a.3. DEBT RATIO a.4. MARKET RATIOS

171717171718

B. VALUE OF THE STOCK I. VALUE OF COMMON STOCKS (GORDON MODEL) II. NET WORTH III. PAR VALUE

18181820

C. COMPANY EARNINGS I. EPS II. P/E III. ERR

a. GORDON MODELS b. AVERAGE RETURN c. HOLDING RETURN

IV. RETURNS a. ROE b. DIVIDEND INCOME c. CAPITAL GAIN

2121212222222224242525

D. CAPITAL BUDGETING ANALYSIS I. INITIAL INVESTMENT II. ANNUAL CASH FLOWS III. PAYBACK PERIOD IV. NET PRESENT VALUE (NPV) V. PROFITABILITY INDEX (PI) VI. INTERNAL RATE OF RETURN (IRR)

26262635353536

E. SUMMARY

F. CONCLUSIONS

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MANULIFE FINANCIAL CORPORATION

I. COMPANY PROFILE

a. NATURE OF THE BUSINESS

Manulife has been conducting business in the Philippines for over 100 years. One of the oldest life

insurance firms in the country, Manulife received its license in 1907 to operate in Manila, 20 years

after the company was first established in Toronto, Canada in 1887 by Sir John A. Macdonald, who

had concurrently held the post of Prime Minister of Canada. The first foreign company to list in the

Philippine Stock Exchange, Manulife is among the top life insurance companies in the country today.

A dedication to client service has paved the way for the Company's growth and increased financial

strength throughout the years.The Manufacturers Life Insurance Co. (Phils.), Inc. ("Manulife

Philippines") is a wholly owned subsidiary of The Manufacturers Life Insurance Company, the

insurance company of Manulife Financial Corporation (MFC). On August 24, 2000, Manulife received

approval from the Philippine Securities and Exchange Commission (SEC) to operate its pre-need

affiliate – Manulife Financial Plans, Inc. (MFP). MFP, a subsidiary of Manulife Philippines, is

committed to offering high quality pension and education plans to the public.

b. ORGANIZATION OF THE BUSINESS

Organizational Structure

From 1907 to 1998, Manulife Financial operated in the Philippines as a branch of The Manufacturers

Life Insurance Company. On January 1, 1999, Manulife's operations in the Philippines became

Manulife Philippines, a wholly owned subsidiary. This move established a more formidable and

permanent presence for Manulife's Philippine operations by conducting its business through a domestic

company. In addition, the incorporation of Manulife Philippines paved the way for the Company to

expand its presence and accelerate its growth to deliver a broad portfolio of products and services to

more people. Headquartered in Metro Manila, today Manulife Philippines reaches out to the different

parts of the archipelago using strategically located field offices and a team of more than 1,000 full time

professional agents. August 24, 2000, Manulife received approval from the Philippine Securities and

Exchange Commission (SEC) to operate its Pension & Education (P&E) affiliate - Manulife Financial

Plans, Inc. (MFP). MFP is committed to offering high quality P&E plans to the public. In the process,

A. INVESTMENT ANALYSIS

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it aims to extend the same valued service Manulife is known to provide. In 2007, the Philippine

Insurance Commission (IC) and the Bangko Sentral ng Pilipinas (Central Bank) approved the operation

of a bancassurance joint venture company, Manulife China Bank Life Assurance Corporation. A

strategic bancassurance alliance between China Banking Corporation (China Bank), the Philippine's

first privately owned commercial bank, and Manulife Philippines, Manulife China Bank Life Assurance

Corporation offers a wide range of insurance products tailored to the needs of China Bank's depositors

and clients.

c. VISION AND VALUES

Manulife Financials vision is to be the most professional life insurance company in the world; providing

the very best financial protection and investment management services tailored to customers in every

market where we do business. With vision comes values. These values guide everything we do - from

strategic planning to day-to-day decision making, to the manner in which we treat our customer and

other stakeholders. These values are described by the acronym PRIDE:

P - Professionalism

We will be recognized as having the highest professional standards. Our employees and agents

will possess superior knowledge and skill, for the benefit of our customers.

R - Real Value to Customers

We are here to satisfy our customers. By providing the highest quality products, services, advice

and sustainable value, we will ensure our customers receive excellent solutions to meet

their individual needs.

I - Integrity

All of our dealings are characterized by the highest levels of honesty and fairness.

D- Demonstrated Financial Strength

Our customers depend on us to be here in the future to meet our financial promises. We earn this

faith by maintaining uncompromised claims paying ability, a healthy earnings stream, and

superior investment performance results, consistent with a prudent investment management

philosophy.

E - Employer of Choice

Our employees will determine our future success. In order to attract and retain the best and

brightest employees, we will invest in the development of our human resources and

reward superior performance.

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d. PRODUCTS AND SERVICES

Individual Products Savings and/or InvestmentsVariable Life FundsFund Accumulation and/or Protection CoverageMedical ProtectionPension & EducationSupplementary Benefits

Group Products Employee Security Program (ESP)Employee Assistance for Small scale Enterprise (EASE)Corporate Plan RightStudent Personal AccidentCredit Life

Individual Products

Manulife Philippines has developed a variety of innovative individual products to address the varied

financial protection needs of its customers.

Savings and / or Investments

Affluence Builder is a regular pay variable life insurance product that offers you the

opportunity to earn market yield rates on a range of investment fund options, while

providing ample insurance protection.

Affluence & Affluence Max are single pay variable life products with several investment

options to match the investment requirements of the policyholder. These products allow

policy owners the flexibility to invest in any one or combination of separate investment

funds through a single premium and later, opt to switch investments partially or entirely

from one fund to another.

Variable Life Funds

Our Company offers a variety of professionally managed investment fund options that one can choose

from in line with his/her financial objectives:

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Affluence / Affluence Builder

Peso Bond Fund seeks to achieve stable and long-term growth by investing in government

securities, high-quality corporate debt securities and/or in pooled fund/s that invest in these

securities and other liquid fixed income instruments.

Peso Equity Fund is designed to achieve long-term capital appreciation by investing in stocks

listed on the Philippine Stock Exchange, government securities and/or in pooled fund/s that

invest in these securities and other liquid fixed income instruments.

Peso Stable Fund is used to achieve a stable and long-term growth by investing in government

securities, high-quality corporate debt securities, stocks listed on the Philippine Stock Exchange,

government securities and/or in pooled fund/s that invest in these securities and other liquid fixed

income instruments.

US Dollar Bond Fund helps to achieve stable and long-term growth by investing in USD

denominated sovereign and corporate debt securities and/or in pooled fund/s that invest in these

securities and other liquid fixed income instruments.

Affluence Max

Peso Secure Fund seeks to achieve a stable and long-term growth, with a target allocation of

approximately 70% in government securities and/or high-quality corporate debt securities and/or

pooled funds that invest in these securities and other liquid fixed income instruments.

Peso Growth Fund seeks to achieve a long-term capital appreciation, with a target allocation of

approximately 70% in stocks listed on the Philippine Stock Exchange and/or pooled fund/s that

invest in these securities and other liquid instruments.

Peso Diversified Value Fund seeks to achieve long-term capital growth, with a target allocation

of approximately 50% in government securities and /or high-quality corporate debt securities and

approximately 15% in stocks listed on the Philippine Stock Exchange and/or pooled fund/s that

invest in these securities and other liquid instruments.

US Dollar Secure Fund seeks to achieve stable and long-term growth, with a target allocation of

approximately 80% in U.S. dollar–denominated sovereign and/or corporate debt securities and/or

pooled fund/s that invest in these securities and other liquid instruments.

Fund Accumulation and / or Protection Coverage

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Seasons is a participating whole life insurance product that provides substantial

benefits and returns for most of one's lifetime. Its key features include among others:

guaranteed coverage up to age 85; guaranteed cash benefit payout options, and a

guaranteed lump sum cash benefit which will be available at age 85.

Freedom is a participating endowment product that provides a variety of guaranteed

cash benefits over a 20-year period or up to the age of 65. These are made possible

through the guaranteed cash payout and guaranteed maturity benefit design features

of the product.

Adam and Eve are gender-specific participating whole life products that

accumulate cash values and earn dividends with coverage up to age 85. These are

comprehensive plans with the following core benefits: guaranteed life insurance

protection; guaranteed major disease benefits; guaranteed accident coverage, and

guaranteed premium waiver protection features.

CriticalCare is a critical illness insurance that provides a lump sum benefit payment

in the event that the insured person is diagnosed to have a critical illness condition.

It is a comprehensive medical protection policy with the following core features:

Guaranteed accelerated critical illness benefit; Guaranteed invasive surgical

treatment benefit; Guaranteed gender-specific illness benefit; Guaranteed 50%

return of premium living benefit, and Guaranteed life insurance protection.

For Education and / or Retirement Pension and Education

New Minds is a participating juvenile anticipated endowment product that offers cash

payouts for a child's high school or college education expenses.

Medical Protection

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Plan Right* is a savings plan that will help address one's retirement fund requirements. It

is designed to provide guaranteed amount benefits upon maturity. It comes with a number

of protection features as well as other optional features.

* - Plan Right is offered through Manulife Financial Plans, Inc. (MFP)

Supplementary Benefits

In order to further customize our products to meet the financial protection requirements of our clients,

there are several supplemental benefit options that can be added to the existing product packages.

Life Insurance Supplementary Benefits

Total Disability Waiver (TDW) waives premiums if the Insured becomes totally disabled before

age 60, and remains disabled for at least six (6) consecutive months; if total disability occurs

between ages 60-65, premiums will be waived up to age 65 only.

Payor's Benefit (PB) waives premium to the earliest of the child's attainment of age 25, basic

policy's premium paying period or payor's attainment of age 60 upon death or disability of the

payor before age 60. After the waiver period and while the policy is in premium paying status,

disability coverage is automatically provided on the insured's life. Thus, the inception of

Disability waiver coverage on the life insured is always coincident with the termination of

coverage of the payor.

Accidental Death Benefit (ADB) provides additional coverage if death occurs due to accident.

Maccimax is a personal rider that provides benefits for the death, dismemberment, disability and

hospitalization resulting from accidents. It has four (4) plan types.

Term Rider (TR) provides term insurance coverage during the coverage period, which is the

same as the base policy, or up to attained age 70, whichever is earlier. Premiums are level.

Hospital income Benefit (HIB) provides fixed benefit allowance for each day (max of 1000 days)

of hospital confinement due to injury or illness: benefit is doubled if confinement is due to dread

disease and tripled if confined in the ICU.

Pre-Need Supplementary Benefits

Accidental Death and Dismemberment (AD&D-PPP or AD&D-MatPd) pays a lump sum benefit

upon accidental death; and cash benefits upon accidental dismemberment of certain body parts.

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Coverage may be up to the end of the paying period or maturity date (or planholder's attainment

of age 70, whichever is earlier).

Term Life (TL) pays a benefit up to 200% of the basic plan's maturity value upon death of the

planholder. Benefit coverage under the TL rider will extend throughout the maturity period and

will expire at the earlier of the maturity date or planholder's 70th birthdate.

Hospital Income Benefit (HIB) pays a fixed benefit allowance to the planholder for each day of

hospital confinement during the paying period or until planholder's age 60, whichever is earlier.

Critical Illness (CI) provides an amount up to 50% of the basic plan's maturity value or Php1

Million, whichever is less, upon the first diagnosis of 6 major illnesses during the paying period

-- Cancer, Kidney Failure, Coronary Artery Bypass Surgery, Heart Attack, Major Organ

Transplant and Stroke.

Return of Payment (ROP CoTerm or ROP+5) provides an amount equal to 100% of the total

installments paid (but based on annual mode) shall be paid to the planholder at the end of the

maturity period or 5 years after the basic plan's maturity date.

Group Products

Manulife has a strong suite of Group products to address various life, disability and pension concerns of

employers, schools, financial institutions and associations.

Employee Security Program (ESP)

A yearly renewable employee benefits program designed to cover the employees' life

insurance, disability, dismemberment and hospital income needs of groups with more

than 10 employees/members

Employee Assistance for Small scale Enterprise (EASE)

A yearly renewable employee benefits program designed to cover the employees' life

insurance, disability, dismemberment and hospital income needs of groups with only 5 -

10 employees/members.

Corporate Plan Right

A limited pay savings program designed for groups wanting pension privileges at a cost

effective rate

Student Personal Accident

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A cost effective accident insurance and dismemberment program designed to cover students of

an educational institution

Credit Life

e. SUBSIDIARIES

John Hancock Financial is a loose term for a major United States insurance company which

existed, in various forms, from its founding on April 21, 1862, until its acquisition in 2004 by the

Canadian insurance company Manulife Financial. It was named in honor of John Hancock, a

prominent patriot. The company continues to operate as a wholly owned subsidiary of Manulife.

Manulife Bank of Canada The Manulife Bank of Canada (Manulife Bank) is a Schedule I

federally chartered bank and a wholly owned subsidiary of the Manufacturer’s Life Insurance

Company of Canada (Manulife Financial). It was established on January 1, 1993, when Cabot

Trust Company, Huronia Trust Company and the Regional Trust Company were merged by

Manulife Financial. Its branch network was sold to the Laurentian Bank of Canada later in 1993

and it became Canada's first bank to sell its products through independent financial advisors. Its

products are designed to be integrated into a client’s overall financial plan and are supported by a

virtual bank experience.

Maritime Life The Maritime Life Assurance Company was a Canadian insurance company

based in Halifax, Nova Scotia. It was founded in 1922 and in 2004 it became fully integrated

with Manulife Financial, with the Maritime Life brand being retired. In 2004 it employed 2700

employees. The Maritime Life headquarters were located in Armdale, Nova Scotia (part of

Halifax) near the head of the Northwest Arm. After the merger with Manulife Financial, the

signage of the buildings was changed and the facility became Manulife's central Halifax office.

f. CORPORATE GOVERNANCE

Management Team (Philippines)

http://en.wikipedia.org/wiki/Northwest_Arm

http://en.wikipedia.org/wiki/Armdale,_Nova_Scotia

http://en.wikipedia.org/wiki/Manulife_Financial

http://en.wikipedia.org/wiki/Halifax_Urban_Area

http://en.wikipedia.org/wiki/Canadian

http://en.wikipedia.org/wiki/Virtual_bank

http://en.wikipedia.org/wiki/Laurentian_Bank_of_Canada



http://en.wikipedia.org/wiki/Wholly_owned_subsidiary

http://en.wikipedia.org/wiki/John_Hancock


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Indren Naidoo President & CEO

Indren Naidoo is the President and Chief Executive Officer of Manulife Philippines. He joined the company in December 2009.Prior to joining Manulife, he has worked in the Philippines for over 8 years as Chief Financial Officer for 2 major multinational life insurance companies. His responsibilities in this capacity included development of business strategy, product design and regular interaction with and support of sales force channels, including Agency, Bancassurance and Alternative Channels. Prior to his time in the Philippines, Mr. Naidoo worked in several countries in Asia in a similar capacity. Mr. Naidoo also has over 11 years experience as a corporate banker with ANZ Banking Group in Australia. Mr. Naidoo holds a Bachelor of Business (Accounting) & CPA and a Graduate Diploma in Computing from Monash

David N. Banks SVP & Chief Financial OfficerDavid Banks is the Senior Vice President and Chief Financial Officer of Manulife Philippines. He joined the company in June 2003. Prior to joining Manulife, he was the Chief Financial Officer and Chief Actuary of a large multinational life insurance company in Indonesia.Mr. Banks has 28 years of experience in the life insurance industry particularly in Actuarial, Finance and Investments. Mr. Banks holds a Bachelor of Science degree in Mathematics from Canterbury University in New Zealand. He is a Fellow of the Institute of Actuaries of London (FIA).

John E. Curtis SVP & Chief Agency OfficerJohn E. Curtis is the Senior Vice President and Chief Agency Officer of Manulife Philippines. He joined Manulife in February 2006.Mr. Curtis comes with almost 25 years of experience in the Life Assurance Industry in the UK and in Asia. He has held a number of Senior roles within Agency, Broker and Bancassurance markets. He worked his way up from a successful Agency person to various Senior Leadership positions in Business Development, Recruitment, Marketing, and Wealth Management. He is a fully qualified Financial Planner and a member of the Chartered Insurance Institute and The Personal Finance Society.

Not In Philippines

Gail C. A. Cook-BennettDirector Since: 1978

Gail Cook-Bennett is Chair of the Board. She assumed her role as Chair in October 2008 after having served ten years as Chair of the Canada Pension Plan Investment Board (CPPIB). Dr. Cook-Bennett holds a BA (Honours) from Carleton University, and a PhD (Economics) from the University of Michigan. She is a Member of the Order of Canada, holds a Doctor of Laws Degree (honoris causa) from Carleton University and is a Fellow of the Institute of Corporate Directors.Donald A. GuloienDirector Since: 2009

Donald Guloien is President and Chief Executive Officer of Manulife Financial Corporation. He is also a Manulife director and Chair of the Company’s Executive Committee. A 28-year company veteran, Mr. Guloien has held leadership roles in both Manulife’s insurance and investment operations, and brings significant experience leading global M&A and business development activity. Before taking on his current role, he served as Senior Executive Vice President and Chief Investment Officer, where he was recognized as a leading global investment executive.Linda B. BammannDirector Since: 2009 Linda Bammann was Executive Vice President, Deputy Chief Risk Officer for JPMorgan Chase & Co. prior to retiring in 2005. She also held several positions with Bank One Corporation, including Executive Vice President and Chief Risk Management Officer from 2001 until its acquisition by JPMorgan in 2004. Prior to that time, Ms. Bammann was a Managing Director with UBS Warburg from 1992 to 2000. She holds a BSC from Stanford University and an MA from University of Michigan. Ms. Bammann currently serves as a director of the Federal Home Loan Mortgage Corporation and was a board member of the Risk Management Association and chairperson of the Loan Syndications and Trading Association.

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John M. CassadayDirector Since: 1993

John Cassaday is President and Chief Executive Officer of Corus Entertainment Inc., a position he has held since 1999. Corus is a Canadian leader in specialty television and radio and is a global leader in the production of children’s animation. Mr. Cassaday has also been Executive Vice President of Shaw Communications, President and Chief Executive Officer of Shaw Media, Star Choice Communications and of CTV Television Network. Mr. Cassaday has an MBA (Dean’s List) from the Rotman School of Management at the University of Toronto. Mr. Cassaday is also active in community affairs, principally with St. Michael’s Hospital.

Lino J. CelesteDirector Since: 1994 Lino Celeste is past Chairman of Aliant Inc., the merged Atlantic provinces telephone companies. Prior to assuming the Chairmanship, Mr. Celeste was President and Chief Executive Officer of New Brunswick Telephone Company Limited. Mr. Celeste holds a P.Eng. (Electrical Engineering) from the University of New Brunswick. He also served as a director of New Brunswick Electric Power Commission and as Chairman of the Greater Saint John Community Foundation, a charitable organization.

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Thomas P. d’AquinoDirector Since: 2005Thomas d’Aquino is Chief Executive and President of the Canadian Council of Chief Executives (“CCCE”), a research and advocacy group composed of 150 chief executives of Canada’s leading enterprises. Mr. d’Aquino holds a BA from the University of British Columbia, an LLB from Queen’s University and the University of British Columbia, an LLM from the University of London and Doctor of Laws honorary degree from Queen’s University and Wilfrid Laurier University. Mr. d’Aquino has served as Special Assistant to the Prime Minister of Canada and a Professor Adjunct on the law of international business transactions. As well as CEO, he is the CCCE’s chief policy officer and strategist responsible for fiscal, taxation, competitiveness, international trade and environmental issues. He is currently Chair of Lawrence National Centre for Policy and Management at the Richard Ivey School of Business and he also chairs The National Gallery of Canada Foundation.

Richard B. DeWolfeDirector Since: 2004

Richard DeWolfe is Managing Partner of DeWolfe & Company, LLC, a real estate management and investment consulting firm. Mr. DeWolfe holds a BAS, Marketing and Finance from Boston University. He is also a director of The Boston Foundation; Trustee of Boston University; Trustee of the 17136 Marine Biological Laboratory; and an honorary director of The Boston Center for Community and Justice. He was formerly Chairman and CEO of The DeWolfe Companies, Inc., the largest homeownership organization in New England, which was previously listed on the American Stock Exchange and acquired by Cendant Corporation in 2002

Robert E. Dineen, Jr.Director Since: 1999

Robert Dineen was Of Counsel to Shearman & Sterling LLP, a leading international law firm headquartered in New York where he was a partner from 1974 until his retirement in December 2005. Mr. Dineen holds a BA from Brown University and an LLB from Syracuse University. Mr. Dineen led several of the firm’s corporate groups, including groups in Latin America and Asia and its project finance work worldwide. Mr. Dineen has extensive experience in public finance transactions in the oil and gas pipeline

business, and as a specialist in U.S. and international private banking and financial transactions.

Pierre Y. DucrosDirector Since: 1999

Pierre Ducros is President of P. Ducros & Associates Inc. in Montréal. Previously, he was Chairman, President and Chief Executive Officer of DMR Group Inc. which he co-founded in 1973, and Vice-Chairman of the Task Force on The Future of The Canadian Financial Services Sector (MacKay Task Force). Mr. Ducros holds a BA from the Université de Paris at Collège Stanislas in Montréal and a B.Eng. (Communications) from McGill University.

Scott M. HandDirector Since: 2007

Scott Hand was the Chairman and Chief Executive Officer of Inco Limited (“Inco”) from April 2002 until he retired in January 2007. Prior to that, Mr. Hand was the President of Inco and held positions in Strategic Planning, Business Development and Law. Inco has been a major global Canadian-based resources enterprise and a leading producer and marketer of nickel and other metals. Mr. Hand serves on the boards of Juno Special Situations Corporation (mining resource investment) and Boyd Technologies LLC (paper non-woven materials). He is also a member of the board of directors of the World Wildlife Fund Canada. Mr.

Hand received a BA from Hamilton College and a JD from Cornell University.

Robert J. HardingDirector Since: 2008

Robert Harding is Chairman of Brookfield Asset Management Inc., a position he has held since 1997. He has held various executive positions with Brookfield (and its predecessor companies) since 1984, including Chief Financial Officer and President and Chief Executive Officer. In his role as Chairman, Mr. Harding represents Brookfield’s interests on the boards of its various affiliates as a director and Chairman of Norbord Inc. and as a director of Fraser Papers Inc. and Western Forest Products Limited. Brookfield Asset Management is a specialist asset management company focused on property, power and other infrastructure assets. Mr. Harding holds a B. Mathematics and a Doctor of Laws honorary degree from the University of Waterloo and is a Fellow of the Institute of Chartered Accountants.

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Luther S. HelmesDirector Since: 2007

Luther Helms has been the Managing Director of Sonata Capital Group (“Sonata”) since 2000. Sonata is a privately-owned registered investment advisory firm. Mr. Helms has extensive banking and financial services experience, holding various positions at Bank of America Corporation, including Vice Chairman from 1993-1998 and was the Vice Chairman of KeyBank from 1998-2000. Mr. Helms was a director of Lifelock, an identity theft protection company. Mr. Helms has an MBA from the University of Santa Clara and a BA in History and Economics from the University of Arizona.

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Thomas E. KieransDirector Since: 1990

Thomas Kierans is Chair of Council and Vice President of the Social Sciences and Humanities Research Council. Mr. Kierans holds a BA (Honours) from McGill University and an MBA (Finance), Dean’s Honours List, from the University of Chicago. Mr. Kierans has also been Chairman of The Canadian Journalism Foundation, Chairman of CSI-Global Education Inc., Chairman of the Canadian Institute for Advanced Research, Chairman of the Board of the Toronto International Leadership Centre for Financial Sector Supervisors, Chairman of Moore Corporation Limited, Chairman of Petro-Canada, President and Chief Executive Officer of the C.D. Howe Institute and President of McLeod Young Weir Limited (later ScotiaMcLeod Inc.).

Lorna R. MarsdenDirector Since: 1995

Lorna Marsden is President Emerita and Professor of York University. Prior to her retirement in May 2007, she was President and Vice-Chancellor and a member of the Board of Governors of York University. Dr. Marsden was President and Vice-Chancellor of Wilfrid Laurier University and served as a member of the Senate of Canada. Dr. Marsden holds a BA from the University of Toronto and a PhD from Princeton University. She is a recipient of honorary Doctor of Laws degrees from the University of New Brunswick, the University of Winnipeg, Queen’s University and the University of Toronto. Dr. Marsden serves as a director of several private and non-profit organizations. Dr. Marsden was appointed to the Order of Ontario

in 2009.

John R.V. PalmerDirector Since: 2009 John R.V. Palmer is Chairman and a founding member of the Toronto Centre, an organization focused on leadership in financial supervision. Mr. Palmer was the Superintendent of Financial Institutions Canada from 1994 - 2001 following an illustrious career at KPMG LLP (Canada) where he was Managing Partner and Deputy Chairman. He was also the Deputy Managing Director of the Monetary Authority of Singapore and has advised other regulators including the Australian Prudential Regulation Authority. He is a chartered accountant and holds a Bachelor of Arts from the University of British Columbia.

Hugh W. Sloan, Jr.Director Since: 1985

Hugh Sloan is Retired Deputy Chairman of Woodbridge Foam Corporation, a manufacturer of automobile parts, where he held various management positions for more than 20 years. Mr. Sloan holds a BA (Honours) from Princeton University. Mr. Sloan serves as a director of a number of Canadian and American corporate, community and charitable organizations. He is a former Staff Assistant to President Richard Nixon and a

former Trustee of Princeton University.

Gordon G. ThiessenDirector Since: 2002

Gordon Thiessen joined the Board following a distinguished career with the Bank of Canada that began in 1963 and culminated in a seven-year term as the Bank’s Governor. He was Chairman of the Canadian Public Accountability Board, the oversight body for the auditing profession in Canada from 2002 to 2008. Mr. Thiessen holds a BA (Honours) and an MA from the University of Saskatchewan and a PhD from the London School of Economics. Mr. Thiessen also serves as a director of the Institute for Researc

MANULIFE FINANCIAL CORPORATION

BOARD OF DIRECTORS

As of November 04, 2009

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Luther S. Helms

John M. Cassaday

Lino J. Celeste

Gail C. A. Cook-Bennett

Dominic D`Alessandro

Thomas P. d`Aquino

Richard B. DeWolfe

Robert E. Dineen, Jr.

Pierre Y. Ducros

OFFICERS

As of June 22, 2009

President & Chief Executive Officer Donald Arthur Guloien

Senior Executive Vice President, Business Dev't & General

Counsel

Jean-Paul (J-P) Bisnaire

Senior Executive Vice President & General Manager, Asia &

Japan Division

Robert A. Cook

Chief Operating Officer John D. DesPrez III

Senior Executive Vice President & General Manager Canada Paul Lawrence Rooney

Senior Executive Vice President and Chief Financial Officer Michael W. Bell

Executive Vice President & Chief Actuary Simon R. Curtis

Vice President & Corporate Secretary Angela Shaffer

g. STOCK EXCHANGE WHERE THE STOCK LISTED

NYSE (New York Stock Exchange) Manulife Financial Corporation Symbol: MFC

Thomas E. Kierans

Lorna R. Marsden

Hugh W. Sloan, Jr.

Gordon G. Thiessen

Scott M. Hand

Robert J. Harding

Linda Bammann

John Ralph Vernon Palmer

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Website: http://www.nyse.com/

TSX (Toronto Stock Exchange) Manulife Financial Corporation Symbol: MFC

Website: http://www.tmx.com/

SEHK (Stock Exchange of Hong Kong) Manulife Financial Corporation Symbol: 945

Website: http://www.hkex.com.hk/index.htm

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PSE (Philippine Stock Exchange) Manulife Financial Corporation Symbol: MFC

Website: http://www.pse.com.ph/

II. ANALYSIS OF THE COMPANY

a. RATIO ANALYSIS

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a.1. PROFITABILITY

Ratios 2008 2007 2006 2005 2004

Net Profit Margin .0157 .12 .116 .100 .0945

Return on Equity 2% 18.4% 16.8% 14.1% 13.7%

Return on Assets 0.002449 0.024379 0.021405 0.018343 0.0138401

Analysis:

In net profit margin of MFC, as we can see from 2004 to 2007 it increases. The higher the ratio the

better. But in 2008, it declined. They become not so efficient for the year 2008. Earnings in 2008 were

negatively impacted by over $3.7 billion of accruals due to the unprecedented declines in worldwide

equity markets and by almost $500 million in provisions and reserve increases for credit defaults for

downgrades, primarily in respect of exposures to the financial sector. Consistent with the decline in net

income, Return on Equity and return on assets was considerably lower than the other year level.

a.2. LIQUIDITY

Ratios 2008 2007 2006 2005 2004

Current Ratio 1.15 1.16 1.16 1.15 1.15

Analysis:

The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to

turn its product into cash. The higher the current ratio, the more capable the company is of paying its

obligations. In this case, current ratio is greater than one it means that the company is more likely to

meet its liabilities which fall due in the next 12 months.

a.3. DEBT RATIO

Ratios 2008 2007 2006 2005 2004

Debt Ratio .87 .86 .86 .87 .87

LTD Equity Ratio .01748 .010314 .01644 .013451 .01600

Analysis:

Debt ratio can help investors determine a company's level of risk. A debt ratio of greater than 1 indicates

that a company has more debt than assets; meanwhile, a debt ratio of less than 1, just like in this

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company, indicates that a company has more assets than debt. The measure or figures above gives an

idea to the leverage of the company along with the potential risks the company faces in terms of its debt-

load.

a.4. MARKET RATIOS

Ratios 2008 2007 2006 2005 2004

Diluted Earnings Per

Share

.32 2.78 2.51 2.03 1.81

Payout Ratio 307% 31% 29% 28% 27%

Dividend Yield 2.2% 1.9% 1.9% 1.9% 1.8%

Analysis:

Through the use of market ratios, we can indicates the scenario, what the companies are doing with their

earnings and how much a company pays out in dividends each year relative to its share price. Year 2008

was not a good year for this company in terms of payout ratio. Compare to other years, 2008 has the

highest payout ratio having of 307% meaning to say the dividend is not more secure. A very low payout

ratio indicates that a company is primarily focused on retaining its earnings rather than paying out

dividends (See Year 2004 to 2007). The payout ratio also indicates how well earnings support the

dividend payments: the lower the ratio, the more secure the dividend because smaller dividends are

easier to pay out than larger dividends. In terms of dividend yield, which is used to measure how much

cash flow you are getting for each dollar invested in an equity position, 2008 is a good year having of

2.2%.The higher, the better.

I. VALUE OF COMMON STOCKS (GORDON MODEL)

Dividend Price

( 1 + RRR ) ( 1 + RRR )

= .13 770

( 1 + .0522 ) ( 1 + .0522 )

= .123550655 + 731.800038

= 731.93 or 732

Vcs = +

+

B. VALUE OF THE STOCK

21

II. NET WORTH

Net Worth = Assets – Liabilities

= $ 205,140,000 000.00 - 176,233,000 000.00

Net Worth (2009) = 28,907,000 000.00

Consolidated Balance Sheets

(Canadian $ in millions, unaudited)

As at December 31

1 1 Assets 2009 2008

Invested assets

Cash and short-term securities $ 18,780 $ 17,269

Securities

Bonds 85,107 83,148

Stocks 9,688 8,240

Loans

Mortgages 30,699 30,963

Private placements 22,912 25,705

Policy loans 6,609 7,533

Bank loans 2,457 2,384

Real estate 5,897 6,345

Other investments 5,321 5,914

Total invested assets $ 187,470 $ 187,501

Other assets

Accrued investment income $ 1,540 $ 1,760

Outstanding premiums 812 799

Goodwill 7,122 7,929

Intangible assets 2,005 2,115

Derivatives 2,680 7,883

Miscellaneous 3,511 3,038

Total other assets $ 17,670 $ 23,524

Total assets $ 205,140 $ 211,025

Segregated fund’s net assets $ 191,741 $ 165,380

Liabilities and equity

Policy liabilities $ 141,687 $ 146,344

Deferred realized net gains 108 127

Bank deposits 14,735 12,210

Consumer notes 1,291 1,876

Long-term debt 3,308 3,689

Future income tax liability 1,178 1,794

22

Derivatives 2,656 6,389

Other liabilities 6,487 7,508

$ 171,450 $ 179,937

Liabilities for preferred shares and capital

Instruments 4,581 3,674

Non-controlling interest in subsidiaries 202 217

Equity

Participating policyholders' equity 80 62

Shareholders' equity

Preferred shares 1,422 638

Common shares 18,937 16,157

Contributed surplus 182 160

Retained earnings 12,870 12,796

Accumulated other comprehensive loss (4,584) (2,616)

Total equity $ 28,907 $ 27,197

Total liabilities and equity $ 205,140 $ 211,025

Segregated funds net liabilities $ 191,741 $ 165,380

III. PAR VALUE

As of FRI FEB 19, 2010 12:10:01 PM

ISIN CA56501R1064 Board Lot 10

Listing Date 27-Sep-1999 Par Value 0.00

Status Open Listed Shares 1,879,737,833

Last Sale 0.00 Outstanding Shares 1,757,741,010

Previous Close (18-Feb-2010) 770.00 Free Float Level 1.2%

Change 0.00 Market Capitalization 1,353,460,577,700

%Change 0.00 Foreign Limit (Percent) No Limit

Open 0.00 YearEnd EPS (End: 31-Dec-2008) 13.375712

High 0.00 Interim EPS (Period: 9mos Sep

2009)12.32418164

Low 0.00 Current P/E Ratio 0.00

Volume 0 52 Week High 1,100.00

Value 0.00 52 Week Low 400.00

Best Bid Volume Best Bid Price Best Offer Volume Best Offer Price

0 0.00 0 0.00

0 0.00 0 0.00

23

I. EARNINGS PER SHARE

FINANCIAL HIGHLIGHTS

(unaudited)

Quarterly Results Year Ended

4Q09 3Q09 4Q08 2009 2008

Net Income (Loss) Attributed to Shareholders (millions) 868 (172) (1,870) 1,402 517

Net Income (Loss) Available to Common Shareholders 848 (193) (1,878) 1,338 487

(C$ millions)

Diluted Earnings (Loss) per Common Share 0.51 (0.12) (1.24) 0.82 0.32

Return on Common Shareholders’ Equity 13.1 (3.0) (28.9) 5.2 2.0

(%, annualized)

Premiums & Deposits (millions) 16,535 16,238 19,493 71,270 75,750

Funds under Management (billions) 439.6 436.6 404.5 439.6 404.5

Capital (billions) 33.2 30.7 30.9 33.2 30.9

II. Price-Earnings Ratio P/E

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

= From PSE February 16, 2010 Php. 700.00

0.82

P/E = 853.66

C. COMPANY EARNINGS

24

The company was currently trading at a multiple (P/E) of 853.66, the interpretation is that an

investor is willing to pay 853.66 for 1 of current earnings. A higher P/E ratio means that

investors are paying more for each unit of net income, so the stock is more expensive compared

to one with lower P/E ratio.

III. EXPECTED RATE OF RETURN ERR

a. GORDON MODELS

Expected return or Required Rate of Return

The expected return (or required rate of return for investors/cut-off rate) can be calculated with the

"dividend capitalization model", which is

Growth Rate = (Return on Equity) x (Retention Rate)

Retention Rate = 1- Dividend Pay Out Ratio

Dividend Pay Out Ratio (DPR) = Dividends/Net Income

Therefore;

ERR = Dividend Payment Per Share

Price Market

ERR = .13

770

ERR = 5.22%

b. AVERAGE RETURN

Sum of HPR = -.086058 Therefore -.086058 / 27

Total HPR = 27 Average Return = -.32%

c. HOLDING RETURN

+ [ ROE x (1- DPR ) ]

+ [ 5.2% x (1 - .000000097 ) ]

http://en.wikipedia.org/w/index.php?title=Dividend_capitalization_model&action=edit&redlink=1

25

Date Close Holding Period ReturnFebruary 16, 2010February 12, 2010

700705

-.71%

February 12, 2010February 09, 2010

705700

.7142%


700730

-4.11%


730750

-2.67%

February 03, 2010January 29, 2010

750750

0%

January 29, 2010January 28, 2010

750740

1.35%


740780

-5.13%


780780

0%


780820

-4.88%


820820

0%


820810

1.23%


810800

1.25%


800790

1.27%


790770

2.60%

January 04, 2010December 29, 2009

770770

0%

December 29, 2009December 28, 2009

770770

0%


770800

-3.75%


800760

5.26%


750730

2.74%


730720

1.39%


720700

2.86%


700720

-2.78%


720700

2.86


700725

-3.45%

26


725725

0%


725750

-3.33%


750760

-1.32%

Total HPR = 27 Sum -.0860580r

-8.61%

Average -.32%IV. RETURNS

a. ROE 1338 / 25 845 = 5.17% or 5.2%

Return on Equity

$ millions

Quarterly Results Year Ended

4Q09 3Q09 4Q08 2009 2008

Net Income (loss) Available to Common

Shareholders per Consolidated

Statement of Operations 848 (193) (1,878) 1,338 487

Opening Total Equity Available to

Common Shareholders 24,812 26,173 24,236 26,496 23,370

Closing Total Equity Available to


*Weighted Average Total Equity Available to


Opening Accumulated other comprehensive income

(loss) on available for sale securities and cash

flow hedges per Consolidated Balance Sheets 442 111 (87) (846) 1,291

Closing Accumulated other comprehensive income

(loss) on available for sale securities and cash

flow hedges per Consolidated Balance Sheets 564 442 (846) 564 (846)

*Adjustment for Average (503) (277) 466 126 (352)

Weighted Average Total Equity Available to

Common Shareholders

Excluding Average AOCI 25,605 25,216 25,833 25,971 24,012

27

*ROE based on Weighted Average Total Equity

Available to Common

Shareholders (annualized) 12.9% (3.0)% (29.4)% 5.2% 2.0%

*ROE based on Weighted Average Total Equity

Available to Common

Shareholders Excluding Average AOCI

(annualized) 13.1% (3.0)% (28.9)% 5.2% 2.0%

b. DIVIDEND INCOME

Corporation’s Board of Directors today declared a quarterly shareholders’ dividend of $0.13

per share on the common shares of Manulife Financial Corporation (the “Company”),

payable on and after March 19, 2010 to shareholders of record at the close of business on

February 24, 2010.The Board also declared dividends on the following non-cumulative

preferred shares, payable on or after March 19, 2010 to shareholders of record at the close of

business on February 24, 2010.

• Class A Shares Series 1 - $0.25625 per share




• Class 1 Shares Series 1 - $0.35 per share

In respect of the Company’s March 19, 2010 common share dividend payment date, the

Board has decided that the Company will issue common shares in connection with the

reinvestment of dividends and optional cash purchases pursuant to the Company’s Canadian

Dividend Reinvestment and Share Purchase Plan and its U.S. Dividend Reinvestment and

Share Purchase Plan. The price of common shares purchased with reinvested dividends will

be reduced by a three (3) per cent discount from the market price, as determined pursuant to

the applicable plan.

C. CAPITAL GAIN ( of the company to their investments )

Total funds under management as at December 31, 2009 were $440 billion, a 22 per cent

increase over the prior year end, on a constant currency basis as policyholder cash in-flows

in excess of out-flows of $21 billion and investment income of $63 billion more than

28

offset unfavorable currency movements of $55 billion over the last twelve months.

Continuing to capitalize on strategic opportunities, Asia and Japan Division announced a

49 per cent investment in a fund management company in China. Manulife will acquire

Fortis Bank SA/NV’s ownership in ABN AMRO TEDA Fund Management Co., Ltd. This

acquisition, subject to regulatory approvals, will provide Manulife with an immediate,

sizable entry point into China’s rapidly growing wealth management industry, with US$4.4

billion in assets under management at year end.

I. INITIAL INVESTMENT

December 15, 2009 (date purchased the stock)

**Note: The student did not use the date November 16, 2009 required by the Adviser because the stock was purchased and

record in the student’s portfolio stated above.

Company Name Number of Stocks Market Price Market Value Gain/Loss

Manulife Financial

Corporation

10 720.00 72, 000.00 -2,000.00

January 16, 2010

Company Name Number of Stocks Market Price Market Value Gain/Loss

Manulife Financial

Corporation

100 700.00 70,000.00 -4,000.00

Capital Gain Current Income Total Return

-2000 .13x100= 13 -1987

D. CAPITAL BUDGETING ANALYSIS

29

Div. per share x

no. of shares in

portfolio

( Current Income +

Capital Gain )

II. ANNUAL CASH FLOWS

File Names: 2008 AnnualReport.pdf, 2007 AnnualReport.pdf, 2006 AnnualReport.pdf, 2005

AnnualReport.pdf, 2004 AnnualReport.pdf or simply go to

URL: http://www.manulife.com/public/investor/index/0,,lang=en&navId=640002,00.html

Condensed Consolidating Statement of Cash Flows

Year 2008 and 2007

Location/File name: 2008 AnnualReport.pdf

Page (on paper): 102 to103

30


Year 2008 and 2007


Page (on paper): 102 to103

31


Year 2006


Page (on paper): 91 to 92

32


Year 2006



33


Year 2005 and 2004



34


Year 2005 and 2004



35


Year 2005 and 2004



36


Year 2005 and 2004



37

III. PAYBACK PERIODPayback Period

Year Cash FlowRRR= 5.22%(in millions)

Initial Cash Outlay18,780

(in millions)1 8,223 (10,557)2 8,943 (1,614)3 10,384 8,7704 11,9875 16,880

Payback Period = 8,770 10,384 = 2.84 < 5 years; Accept

Discounted Payback Period

Year Free Cash Flows

(in millions)

PVIF(Appendix C)

Discounted Free Cash Flows(in millions)

Cumulative Discounted

FCF(in millions)

0 18,780 (18,780)1 8,223 .950 7,811.85 (10,968.15)2 8,943 .903 8,075.53 (2,892.62)3 10,384 .858 8,909.47 6,016.854 11,987 .816 9,781.395 16,880 .775 13,082

SUM 47,660.24 Discounted Payback Period = 2,892.62 8,909.47 = 2.32 < 5 years; Accept

IV. NET PRESENT VALUE (NPV)

2 years +

2 years +

38

NPV = 6,016.85 (in millions) Accept It is an indicator of how much value an investment or project adds to the firm.

V. PROFITABILITY INDEX (PI)Profitability Index = Total Free Cash Flows 47,660.24 Initial Cash Flow 18,780

VI. INTERNAL RATE OF RETURN (IRR)

Discount Rate Present Value Difference Difference44% 19,014,793,940.00 234,793,940

Initial Outlay 18,780,000,000.00 338,951,06045% 18,675,842,880.00

Try i = 44%

Year Free Cash Flows PV Factor at 44 % Present Value1 8,223,000,000 .694444444 5,710,416,6632 8,943,000,000 .482253086 4,312,789,3483 10,384,000,000 .334897976 3,477,580,5834 11,987,000,000 .232568039 2,787,793,0835 16,880,000,000 .161505582 2,726,214,224

Sum 19,014,793,940Initial Outlay 18,780,000,000.00

Try i = 45%

Year Free Cash Flows PV Factor at 45 % Present Value1 8,223,000,000 .689655172 5,671,034,4792 8,943,000,000 .475624256 4,253,507,7213 10,384,000,000 .328016728 3,406,125,7044 11,987,000,000 .226218433 2,711,680,3655 16,880,000,000 .156012712 2,633,494,594

Sum 18,675,842,860Initial Outlay 18,780,000,000.00

= 2.5378 Accept

39

Therefore:

IRR = 44% + x ( 45% - 44% )

IRR = 44% + .692707495 (1%)

IRR = 44% + .006927074

IRR = .446927075

IRR = 44.70% Accept

Manulife Financial Corporation was first established in Canada. It is one of the oldest

life insurance firms in the Philippines and first foreign company to list in the PSE. Manulife received

approval from the Philippine Securities and Exchange Commission (SEC) to operate its Pension &

Education (P&E) affiliate - Manulife Financial Plans, Inc. (MFP). MFP is committed to offering high

quality P&E plans to the public. In the process, it aims to extend the same valued service Manulife is

known to provide. Manulife Philippines has developed a variety of innovative individual and group

products to address the varied financial protection needs of its customers. Overall analysis for MFC

for the year 2004 to 2008, they are maintaining the financial strength in a time of crisis. From an

operating perspective, 2008 was a very strong year for Manulife. In 2009, they have good investments

results in the face of challenging markets. Ratios for five years were computed together with analysis.

Value of the stock was computed also through the use of Gordon model. Net worth and par value were

also presented. Company earnings was determined through the Earnings per share, Price earnings ratio

and ERR. While the ROE Dividend income and capital gain is put under the classification of return. In

this work, the researcher made a Capital Budgeting Analysis. It includes here the researcher’s initial

investment in MFC recorded in PSE’s portfolio. Relating to the PSE portfolio, the student has a loss of

2000.00 in December 15 last year and loss of 4000.00 in January 16, 2010. In between the given time,

234,793,940338,951,060

E. SUMMARY

40

the stock was gaining. The price of a stock fluctuates fundamentally due to the theory of supply and

demand. Like all commodities in the market. Since it is fluctuating, we can’t really tell if until the end

of a given time it can gain or what return we can have. Researcher also calculated the payback period,

net present value, profitability index and internal rate of return. For additional information, the

researcher includes the five year cash flows from year 2004 to 2008.

Manulife Financial Corporation is under the classification of financial services in Stock

Exchange. You can buy their stocks in different stock exchange-Toronto, New York, Hongkong and in

Philippines. A stock is under of investments. As we relate the investments of the researcher to the

portfolio in PSE, MFC was NOT GAINING. It has a loss in December 15, 2009 of 2000.00 and loss in

January 16, 2010 of 4000 having the same volume of 100. Researcher concludes that you cannot sell

your stocks if it’s having a loss. No one will be interested in a stock which is not gaining. As long as

your stock is gaining, sell it as possible as you can for you to earn. Concerning about the project if

will be accepted, we must identify it first. In order for us to make a decision, researcher conclude that

the process of capital budgeting is useful to involve with respect to investments in fixed assets. In

given example in page 33, the project is accepted through the use of payback period even though it is

not incorporating the time value of money. In discounted payback period, it is also accepted

considering the time value of money. The same decision also for NPV, Profitability index and IRR.

Researcher also concludes that to make such decisions, we have to use the free cash

flows, consider the time value of money, and be consistent with the firm’s goal of shareholder wealth

maximization

F. CONCLUSIONS

http://en.wikipedia.org/wiki/Supply_and_demand

http://en.wikipedia.org/wiki/Supply_and_demand

41

The purpose of this work is to teach the readers and researchers to analyze the

company where the stocks invested in a given portfolio through the use of ratio analysis, value of

common stock, company earnings, returns, and capital budgeting analysis. It is very important to read

this kind of particular piece especially to the finance students. Students can use this work as a guide in

how to analyze investments and to make decisions whether to accept or not the projects . Computing

and getting the value is not enough. Without analysis of the performance of the company, we cannot

determine if we need to buy or sell stocks. An investor need to be smart enough and keep on updates

and look also for the past performances of the company so the investor can make a financial decision

corresponds to the investments.

Example of Investment Analysis (School Project)

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