HDFIV Report Card @ 21 March 2008

Performance



Kuala Lumpur Composite Index ("KLCI") fell from 1,194 (on 14 March 2008) to 1,189 (on 21 March 2008), representing an marginal drop of 0.4%. Hengdai Equity Fund IV ("HDFIV") made it's maiden investment in Berjaya Sports Toto Berhad during the week and net asset value dropped by 1%. The decrease is due to the valuation of Berjaya Sports Toto Berhad's share price based on closing price and after paying for minimm brokerage commission. In the above graph, I have added a new line in brown colour. The new line represents the performance of HDFIV vis-a-vis KLCI's. To illustrate, when the line is showing 10% at a certain date, it simply means that the return of HDFIV is 10% more than KLCI's return.



Purchase

HDFIV made an investment of 600 units of Berjaya Sports Toto Berhad at RM4.82 during the week. Basis of investments are set out in http://seaneinvest.blogspot.com/2008/03/riding-on-gamblers-when-times-are.html.

Sell

No disposals during the week.

Asset Allocation

We have put about 61% of our money into equities, leaving a comfortable buffer in the form of fixed income and cash. The cash buffer, coupled with the incoming cash by next month, should provide sufficient capital to average down if the market continuest to plummet. On the other hand, you may ask why are we not keeping 100% cash when the market is going down. The answer to that is the market is very volatile at the moment with lots of development in the United States as the Federal Reserve gave their best shots in saving financial institutions. The impact is that KLCI may swing both ways. We wouldn't want a scenario where KLCI rebound and we end up holding no stocks at all.

Note: Asset allocation shows the three main categories that our money lies in. The main category which we are expected to invest in to make the return that we wanted is Equities. Secondly, Fixed Income is in the form of fixed deposits that provides stable but low return. This second category provides small return when the cash is yet to be utilised for investment. As there is a lock-in period for fixed deposit such as at least for two months (if the amount is less than RM5,000), there is a need to maintain cash in the form of 'pure' cash, which is the third category. The set back of holding 'pure' cash ("Cash") is that we do not earn any return at all.