Where Are We?

High inflation due to rising food prices and oil. Economy growth is slowing down and major countries in the world are heading towards recession. You can call that stagflation. Construction and properties industries are basically bleeding to death soon with rising material costs like steel, cements, bricks and transportation costs. The rakyat are not having enough disposable income to live a normal life. Our government is busy hurling allegations against the opposition. You bombed a pitiful Mongolian lady, shout the opposition. You poked a pitiful young lad's ass, shout the government. Now I declare, now I don't declare (because I am under duress when I declared).

Here we are. Trapped in a rubble worst than those caused by a 9 magnitude earthquake.

From the day we started our fund i.e. 1 March 2008, KLCI has since dropped 14%. Our fund, as expected, also suffered a drop in value by about 10%. Key point here is to continue to be able to outperform the KLCI. We are now outperforming KLCI by 4% as of last Friday. We have 30% in the form of cash (approximately RM10,000) and have the benefit of cashinflow every month. We can easily average out some of our cost of investment but the strategy now is to keep the proportion intact, adopt a defensive stance while monitoring the political situation. Stocks are cheap at the moment but as mentioned, we will retain the RM10,000 cash.

HDFIV Report Card @ 18 April 2008

Performance
We are registering a return of 5.76% so far, outperforming KLCI by 9.41% since inception (on 1 March 2008). KLCI is still down 3.66% since 1 March 2008. Berjaya Sports Toto and Bursa Malaysia are the top performers for our HDFIV this week, both registering returns of 7% and 6% respectively due to increase in price and the dividend income.

Purchase
No purchase this week.

Sell
No selling this week.
Asset allocation
We are holding about 25% cash and 75% equity at the moment.

HDFIV Report Card @ 11 April 2008

(will try to update the chart later - unable to upload at the moment)

Performance
Kuala Lumpur Composite Index ("KLCI") increased from 1,221.98 (4 April 2008) to 1,246.79 (11 April 2008), representing an increase of 2.0%. Hengdai Equity Fund IV ("HDFIV")'s registered a return of RM26.64 or 0.31%, down from 1.37% in the previous week. So far, HDFIV is beating KLCI by 6.61%, lower compared to 9.54% a week ago. KLCI had a small rally on Wednesday and Thursday, increasing from 1,228.63 to 1,246.79, mostly boosted by plantation stocks. At the moment, our portfolio does not hold any plantation stocks hence not riding up together with the KLCI.

Purchase

Bought 700 units of Bursa Malaysia (Stock code 1818) today at RM8.70.

Sell

No disposals during the week.


Asset Allocation

We have increased the equity exposure to 76% after today's purchase of Bursa Malaysia. That leaves a cash buffer of about 24% which will easily replenish itself back to 50% thereabout come the third month's capital inflow.


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.

HDFIV Report Card @ 4 April 2008

Performance

Kuala Lumpur Composite Index ("KLCI") decreased from 1,256.54 (28 March 2008) to 1,221.98 (4 April 2008), representing a decrease of 2.8%. Hengdai Equity Fund IV ("HDFIV")'s registered a return of RM101.94 or 1.78%, down from 4.39% in the previous week. Reason for the decrease is due to the lower valuation of Malayan Banking Berhad and a larger capital base in view of the new shareholders and as well as the impact from 2nd month's inflow of capital.

So far, HDFIV is beating KLCI by 9.94%, consistent with 9.76% a week ago.

Purchase
No purchases during the week.

Sell
No disposals during the week.

Asset Allocation
With additional capital coming from new shareholders and 2nd month's inflow of capital, equity allocation has decreased from 71% to 42%. We are again holding back a comfortable cash buffer of 58%. This comfortable cash buffer will allow us to snap up some cheap stocks that took some beatings during this week. Hapseng Plantations Berhad is currently in my radar as the stock plummeted to one year low of RM2.57 on 3 April 2008. The stock recovered some lost ground by closing at RM2.65 today.

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.

HDFIV Report Card @ 28 March 2008

Performance

Kuala Lumpur Composite Index ("KLCI") increased from 1,189 (on 21 March 2008) to 1,256.54, representing an increase of 5.7%. Hengdai Equity Fund IV ("HDFIV")'s registered a return of RM223.94 or 4.39%, up from -0.87% in the previous week.

So far, HDFIV is beating KLCI by 9.96%, slightly higher than 9.77% a week ago.

Purchase

HDFIV made an investment of 150 units of Malayan Banking Berhad at RM8.30 per share. The all in cost per share is RM8.36.

Sell
No disposals during the week.

Asset Allocation

We have increased our equities from 61% to 71% this week, still 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.

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.

GangBang Team Got Another Two

During the open period of our Hengdai Equity Fund IV, we have another two new shareholders, namely Aunty Hong and Mei. Please refer shareholding structure (Section 3 of the Fund Agreement) below after the inclusion

Indon Bet

Malayan Banking Berhad ("Maybank") roared and surprised investors today by announcing that it would pay USD1.5 billion or roughly RM4.8 billion for a 56% stake in Indonesia's sixth largest lender, namely Bank Internasional Indonesia ("BII"). The price tag commands 23% premium to the Indon bank's share price on Tuesday and would also offer to buy out the Indon Bank's minority shareholder for USD1.2 billion or roughly RM3.8 billion.

Is that a good news?

Maybank's shares tumbled to a 3 1/2-year low today to about RM8.20-RM8.30.

"The price tag... was more than 50% higher than we assumed for a mediocre franchise," Citigroup said in a note, downgrading Maybank to a sell from a buy. It slashed Maybank's target price to RM8.38 a share from RM10.63.

At the first few minutes of opening of the stock market, it dived to RM8.00, its lowest level since August 2004. The price offered to buy BII represented 4.6 times book value, considered expensive even when compared with Chinese banks that trade at between 3.3 and 5.4 times book value, according to Reuters data.

"Short term pain, long term gain", echoed local research houses like CIMB and OSK. I agreed. At RM8.30, Hengdai Equity Fund invested 150 units based on the remaining cash on hand. Do not worry about the minimum brokerage fee (that jacks up the total cost since the units purchased were low at 150 units) as I have managed to purchase those units from a related fund that took up 1,000 units.

We report more about this week's investment - The Indon Bet. Stay tuned.

New GangBang Member

As approved by all the shareholders of Hengdai Equity Fund IV ("HDFIV"), we now have a new contributor to the fund of RM300 per month. The inclusion of the new member brings the total cash inflow to RM4,400 per month.

Section 3 of the Fund Agreement is amended accordingly:

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.

Stock Sniffing

As Hengdai Equity Fund IV ("HDFIV") has made its maiden investment in Berjaya Sports Toto Berhad ("Bjtoto"), we will be sniffing the stock for its financial results, corporate developments and other announcements that may affect the underlying value of the company.

As long as the story still gels in nicely, we will keep the stock in our portfolio. On the other hand, if the share price drops due to "fear" in the market, we will sweep in more stocks. Sounds simple but it takes alot of courage to sweep in more stocks when the price drops. There is still a tendency to ponder on this question - Is there something bad happening in the company that causes the drop in the share price that I am not aware of? This fear in mind might delay or even stop the decision to sweep in more stocks, hence losing the opportunity to average down the cost per share before the share price recovers.

Riding on Gamblers When Times Are Uncertain

Let's do a simple research. First, think of family members or friends who gamble on 4-digits. Next, ask them whether are there any chances that they will consider cutting down on their stakes when US is experiencing sub-prime crisis or when 6 out of 10 economists are predicting that the US is heading towards recession.

Blink... blink... They probably stare at you blankly, not even attempting to figure out what sub-marine opps, sub-prime crisis is. Not to mention that they do not even know what economists do. Betting on 4-digits have been a lifestyle for most Malaysians. There are 1001 reasons that 4-digits gamblers rely on in making their bets. Dreams, car accidents, birth dates, car number plates, house nos, telephone nos, identification card nos, nos provided by mediums and not forgetting Flower Horn, to name a few. Once betting becomes a hardcore lifestyle, it's difficult to cut down even when the bad economy condition is hitting the gamblers. My mum once said, when times are bad, the more the gamblers need to bet to earn some money as there are no other sources of income. If you are wondering, yes, my mum is a 4-digits gambler herself.

From this simple observation, 4-digits gambling industry becomes a defensive haven when times are uncertain. In this regard, there are a few stocks that we can look at - Magnum, Berjaya Toto and Tanjong. My good friend, PLing has also recently highlighted to me the consistent dividend that Berjaya Toto provides 4 times per year. This stock has always been under my radar of research and based on the following catalysts, Hengdai Equity Fund has invested 600 units of Berjaya Toto at RM4.82 per share today:

(a) Market share continues to rise

Revenue expanded by 11.7% in 3rd quarter, representing year to date growth of 9.3%. The good result is partially driven by the introduction of 6/52 Mega Jackpot in June 2007 and saliva-inducing jackpot of RM19.6 million during the period. As compared to its competitors, the company has market share of more than 40%.

(b) Share buyback

When a company buys back its share from the stock market, it means that the company is of the view that its stock is worth more than what the market is willing to pay for. The company had made the following share buybacks during the past few months:

June 2007 : 14,000,000 units at RM5.23

July 2007: 500,000 units at RM5.31

August 2007: 5,000,000 units at RM4.74

January 2008: 3,000,000 units at RM5.05

March 2008: 2,030,072units betwen RM4.82 to RM5.10

The average cost per share that the company bought back was roughly at RM5.09. If the share price goes down further, the company may most likely continue with its share buy back programme. Our purchase price of RM4.82 is 5.6% below the average share buy back price.

(c) Good dividend

At share price of RM4.82, dividend yield is expected to be good, may be hitting a double digit return if company maintains its dividend payout ratio. This is also a good reason to hold the shares, notwithstanding the price volalitily during uncertain times as the dividend yield is much better than fixed deposit rate.

(d) Management buy in

The Managing Director/Chief Executive Officer, namely Tan Sri Dato' Seri Vincent Tan Chee Yioun has also been buying shares. A quick summary of his recent purchase is as follows:

Our purhase price of RM4.82 is approximately 12.1% below Tan Sri Dato' Seri Vincent Tan's recent purchase price.

HDFIV Report Card @ 14 March 2008

Performance
This is the first performance report of Hengdai Equity Fund IV ("HDFIV") to fellow shareholders. KLCI was at 1,330.61 at date of commencement of HDFIV i.e. 3 March 2008. As at 14 March 2008, KLCI was recorded at 1,179, representing a drop of 11%. As HDFIV has not made any investments, the return is nil. NAV in the able is defined as the net asset value of HDFIV or in layman terms is how much the fund is worth.

Purchase
No purchases were made.

Sell
No investments were sold.

Asset Allocation

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. At the moment, Equities is at 0% as we have yet to make any investments. 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.

No Movement Means Movement

This week, the Monkeys are getting naughtier and not slowing down their mischievous activities. They pulled and pushed the Investment Jungle Lifeline. Monkey Subprime Crisis has been the leader of the pack for the past few weeks, pulling down the lifeline with new acrobatic moves. This week, Monkey Subprime Crisis found a new friend, Monkey Post-Election Effect. Being a very special specie, Monkey Post-Election Effect demonstrated its very first move in Malaysia and pulled the Investment Jungle Lifeline down by more than 10% in one day.

The Investment Jungle Lifeline has its life saving mechanism, knowing that Monkeys pulled and pushed both expected and unexpectedly. It rebounded on the second and third day after Monkey Post-Election Effect pulled it down. Eventually the swing ended at 1,194.84, representing a 10.2% drop from 1,330.61 as at the inception date of Hengdai Equity Fund IV.

In the chaotic happenings between the Monkeys and the Investment Jungle Lifeline, sat a Zen Monk. He is studying the Monkeys and the art of riding the Investment Jungle Lifeline. This week, he didn't move. And not moving at this juncture is the best strategy as no movement means movement.

Political Tsunami Swept KLCI Along

I can't stop myself from taking a time off my lunch to drop an article. The historical event on 8 March 2008 is a day of political tsunami as voters in the country voiced their dissatisfactions over the ruling Barisan Nasional by voting for the oppositions. The swing was so great that the oppositions themselves did not expect such outcome.

On the very first trading day of KLCI after the election result, KLCI fell by 7.24% to 1,202.51 at 10am. Most government related stocks went for a bungee jump, only that it is without the rebound at sight as yet. A classic example of fear, investors can't help but to sell before the rest do, hence triggering selldowns in non-government related stocks.

Should investors go into the market now? Not at the moment. The drop in KLCI will trigger some margin calls and sell-down limits of institutional investors and may drag the selling further. Tomorrow or the day after might be the day Hengdai Equity Fund IV ("HDFIV") makes its first acquisition. So far, HDFIV has been outperforming KLCI since the inception of the fund on 1 March 2008 just by not investing at all. KLCI was at 1,330.61 (as at 3 March 2008). It has since dropped to 1,202 (10am today), representing a 10% drop. Our fund is still registering nil return at the moment but has outperform the KLCI by 10%.

I Prefer Gang Bang

Ahem Ahem Ahem... According to wikipedia, a gang bang or gangbang is a situation in which one individual, either a woman or man, has sexual intercourse with multiple partners in turn.

These multiple partners share one thing in common - to derive sexual satisfaction on one target. Don't get me wrong. I am not beginning to write about sexual fantasies here. Much to the disappointment for some I believe.

Drawing reference to the essence of a gangbang, a group of close friends of mine have decided to jointly incorporate a fund with aim of deriving financial satisfaction on our target. And our target is none other than financial freedom.

I have talked about setting aside RM500 solely for investments in stock market. Now, together with them, we have managed to collectively agreed to build up a cash flow of RM4,000 per month for a ten years investment horizon. Hence, this blog now also serves as an update on investment decisions made by myself, as the fund manager for the fund and other news in the market that they would also like to know.

Trust is extremely important among ourselves to be able to pool in resources and achieve our aim together and sooner. Nevertheless, I have decided to put in writing our understanding in undertaking this fund of ours which we called it the Hengdai Equity Fund IV ("HDFIV"). Hengdai literally means "brothers" in Chinese language and we have decided to just to stick with "brothers" although there are girls within the group. It's the relationship that counts. A relationship with trust and similar aim in life. Roman IV is basically number 4 and again in Chinese, 4 means "die". Probably Lilian Too, the famous fengshui consultant in Malaysia will ban the usage of 4 in such important fund of ours. However, we decided to take the risk as we would like to remind ourselves that we will "die" financially if we don't start investing.

Our agreement reads:

This fund agreement dated 26 February 2008 sets out the agreement between the persons listed in Section 3 to collectively contribute an agreed sum for investment in accordance with the parameters of the Fund listed in Section 3.

This agreement is not a legal agreement nor it is an invitation or offer for sale to public. The purpose of the agreement is to capture the understanding between the persons listed in Section 3.

This agreement also does not meant to be exhaustive in terms of terms and conditions. The information set out in Section 1 and 2 may be added/altered provided ALL the shareholders agree to the amendment for fairness purpose.

Section 1 Fund Information

Name	:	Hengdai Equity Fund IV
Category	:	Equity
Launch Date	:	15 February 2008
Closing Date	:	25 February 2008
Commencement Date	:	1 March 2008
Investor’s Risk Profile	:	Aggressive
Fund Objective	:	For aggressive investors who can stomach volatility in the value of the fund in the short run for long term capital appreciation. Seek capital growth over long-term period through investments in growth stocks.
Investment Strategy	:	Focuses on diversified portfolio of companies with good growth prospects that are listed on Bursa Malaysia Securities Berhad. May invest in foreign markets if outlook is good. With no pressure on reporting dates, the fund can sit idle on cash or fixed income securities to wait for downturn in stock market. Do not need to actively trade stocks to take profit or cut losses.

Section 2 Investment Information

Initial amount	:	Nil
Minimum amount	:	RM100
Frequency	:	Every month
Amount per frequency	:	Units of RM100
Management fee	:	Nil
Other fee	:	Relating to purchase of stocks.
Investment Horizon	:	10 years
Withdrawal option	:	Any point of time during the Investment Horizon.
Withdrawal value	:	Value of investment based on proportion of invested amount to the fund. Value will be calculated based on closing price of the fund on the day of receipt of request for withdrawal.
Dividends	:	No dividend will be declared as return made will be reinvested for growth purpose.
Fund manager	:	Seane and will decide on investments for the fund
Auditors	:	Cat and Nerd Nerd
Liquidator	:	Jiggy

Section 3 Shareholders

Monkey 500 (12.20%)
Alien 500 (12.20%)
Seane 500 (12.20%)
Piggy 400 (9.76%)
Old 400 (9.76%)
Valerie 300 (7.32%)
Pet Pet 200 (4.88%)
Nerd Nerd 200 (4.88%)
Vy Vy 200 (4.88%)
Nick 200 (4.88%)
Kit 200 (4.88%)
Fat Cat 200 (4.88%)
Jiggy 100 (2.44%)
Ghost 100 (2.44%)
Hoon 100 (2.44%)
Total 4,100 (100.00%)

Section 4 Procedures

For deposit

Timeline		Procedures
Last day of each month (commencing 29th February 2008)		Deadline for depositing of the investment amount. A late penalty of RM1 per day will be charged

For withdrawal

Timeline		Procedures
T day*		Submit request for withdrawal
T day		Calculation of market value of fund on the closing prices of stocks
T + 1 day		Commencement of sale of stocks
T + 4 days		Receipt of monies from broking house
T + 7 days		Clearance of cheques receipt from broking house
T + 8 days		Commencement of transfer of monies from Hengdai Equity Fund IV bank account to shareholder. Transfer may take more than 1 day as transfer amount is limited by the setting in the bank account. Cheque may be written to fasten the process.

* Day is referred to working day which excludes Saturday, Sunday and public holidays

Section 5 Responsibilities

(a) Liquidator

In catering for any unforeseen events whereby the Fund Manager is no longer able to invest for the fund or can't access the bank account and trading account, the Liquidator will step in and perform the following:

(a) Obtain the password to access the internet banking account from the Auditors.

(b) Call the stockbroker and order for sale of all stocks as soon as possible without delaying unless ALL shareholders agree to extend and hold on to the stocks.

(c) Bank in cheques received from the sale of stocks into the bank account.

(d) Transfer the cash obtained from sale of all assets to all shareholders in accordance to the proportion of shareholding listed in Section 3 (after confirmation with the Auditors)

(b) Auditors

(a) Obtain and safeguard the password of the internet bank account of the Fund Manager.

(b) Keep the contact details of the stockbroker.

(c) Perform random check on the internet bank account on the inflow and outflow of cash. Raise queries whenever appropriate.

(d) Audit the account statements prepared by the Fund Manager on a monthly basis.

(e) Confirm the liquidation value before Liquidator distribute cash upon liquidation.

(c) Responsibilities of Shareholders

(a) Bank in money according to Section 4.

(b) Monitor investment and performance of portfolio at your own discretion by logging on to http://seanelynch.blogspot.com/.

(c) ALL shareholders must agree to any additions, amendments or deletion of the terms in this agreement

(d) Fund Manager

(a) Invest in accordance with Fund Information for the interest of shareholders.

(b) Prepare account statements on a monthly basis for audit purpose.

(c) Update value of investments on a weekly basis.

(d) Clarify and communicate investment decisions to shareholders.

Section 7 Declaration

I, [name as per Section 3], understand and agreed to the above. I may have to bear any losses and of course enjoy the profits if I decide to withdraw early and during the investment horizon.

Nevertheless, I promise that I will not put any blame or cause any form of sufferings, either direct or indirect, to Fund Manager as I believe the Fund Manager has put the money where her mouth is and as a result will enjoy the profits and bear the losses together with me.

I also understand that the Fund Manager has given her undertaking to act in the best interest of the fund and will not in any event withdraw the fund for personal interest or commit fraud or whatsoever that deprived the financial benefits of the fund.

Yours sincerely

[name as per Section 3]

Let the gangbang begins....