ATRAM AsiaPlus Equity Fund, Inc.

Financial Statements
December 31, 2018 and 2017
And Years Ended December 31, 2018, 2017
and 2016

and

Independent Auditor’s Report

 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 October 4, 2018, valid until August 24, 2021
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-5 (Group A),
Philippines November 6, 2018, valid until November 5, 2021

INDEPENDENT AUDITOR’S REPORT

The Board of Directors and Stockholders

ATRAM AsiaPlus Equity Fund, Inc.

Report on the Financial Statements

Opinion

We have audited the financial statements of ATRAM AsiaPlus Equity Fund, Inc. (the Fund), which
comprise the statements of assets and liabilities as at December 31, 2018 and 2017, and the statements of
comprehensive income, statements of changes in net assets and statements of cash flows for each of the
three years in the period ended December 31, 2018, and notes to the financial statements, including a
summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Fund as at December 31, 2018 and 2017, and its financial performance and its cash flows
for each of the three years in the period ended December 31, 2018, in accordance with Philippine
Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Fund in accordance with the
Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the ethical
requirements that are relevant to our audit of the financial statements in the Philippines, and we have
fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.

Other Information

Management is responsible for the other information. The other information comprises the information
included in the SEC Form 20 IS (Definitive Information Statement) and SEC Form 17 A for the year
ended December 31, 2018, but does not include the financial statements and our auditor’s report thereon.
The SEC Form 20 IS (Definitive Information Statement) and SEC Form 17 A for the year ended
December 31, 2018 are expected to be made available to us after the date of this auditor’s report.

Our opinion on the financial statements does not cover the other information and we will not express any
form of assurance conclusion thereon.

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In connection with our audit of the financial statements, our responsibility is to read the other information
identified above when it becomes available and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the audits, or otherwise
appears to be materially misstated.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in
accordance with PFRSs, and for such internal control as management determines is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or
error.

In preparing the financial statements, management is responsible for assessing the Fund’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Fund or to cease
operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Fund’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with PSAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:

∂ Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

∂ Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund’s internal control.

∂ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

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∂ Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Fund’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Fund to cease to continue as a going
concern.

∂ Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.

Report on the Supplementary Information Required Under Revenue Regulations 15-2010

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken
as a whole. The supplementary information required under Revenue Regulations 15-2010 in Note 16 to
the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not
a required part of the basic financial statements. Such information is the responsibility of the
management of ATRAM AsiaPlus Equity Fund, Inc. The information has been subjected to the auditing
procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly
stated, in all material respects, in relation to the basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Bernalette L. Ramos
Partner
CPA Certificate No. 0091096
SEC Accreditation No. 0926-AR-2 (Group A),
June 16, 2016, valid until June 16, 2019
Tax Identification No. 178-486-666
BIR Accreditation No. 08-001998-81-2018,
March 14, 2018, valid until March 13, 2021
PTR No. 7332600, January 3, 2019, Makati City

April 13, 2019

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ATRAM ASIAPLUS EQUITY FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES

December 31
2018 2017

ASSETS

Cash in Banks (Note 6) $60,868 $82,957

Financial Assets at Fair Value through Profit or Loss (Note 7) 786,120 839,527

Receivables (Note 8) 255 1,101

$847,243 $923,585

LIABILITIES

Accounts Payable and Accrued Expenses (Note 9) 9,375 17,461

NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS

(Note 10) $837,868 $906,124

Net Asset Value (NAV) Per Share (Note 10) $0.9291 $1.1083

See accompanying Notes to Financial Statements.

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ATRAM ASIAPLUS EQUITY FUND, INC.
STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

2018 2017 2016

INVESTMENT INCOME
Dividend income (Note 7) $13,116 14,304 4,534
Foreign exchange gains 66 87 –
Interest income (Note 6) 35 – 4
Net fair value gain (loss) on financial assets at
fair value through profit or loss (Note 7) (147,931) 270,816 (112,319)
Trail fee – – 6,382
(134,714) 285,207 (101,399)

INVESTMENT EXPENSES
Broker's Commission 309 – –
SCCP Fees 1 – –
310 – –
NET INVESTMENT INCOME (135,024) 285,207 (101,399)

OPERATING EXPENSES
Distribution fees (Note 12) 7,653 7,935 –
Directors’ fees 3,416 3,179 1,682
Management fees (Note 12) 2,794 5,304 12,751
Service fees (Note 12) 2,334 – –
Fund accounting fees (Note 14) 2,279 2,382 2,562
Legal and audit fees 2,183 2,768 3,370
Custodian fees (Note 14) 1,286 2,298 2,392
Taxes and licenses 992 697 340
Transfer agent fees (Note 12) – 2,503 4,224
Miscellaneous 1,254 811 2,291
24,191 27,877 29,612

NET INVESTMENT INCOME (LOSS)

BEFORE INCOME TAX (159,215) 257,330 (131,011)

PROVISION FOR INCOME TAX (Note 11)

Final tax 5 – 1
Minimum corporate income tax – 1,089 –
5 1,089 1

INCREASE (DECREASE) IN NET

ASSETS ATTRIBUTABLE TO
SHAREHOLDERS FROM
OPERATIONS (Note 10)* ($159,220) $256,241 ($131,012)

Earnings (Losses) Per Share (Note 10) ($0.1826) $0.2731 ($0.0890)

*There were no other comprehensive income items in 2018, 2017 and 2016.

See accompanying Notes to Financial Statements.

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ATRAM ASIAPLUS EQUITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS

Years Ended December 31

2018 2017 2016

NET ASSETS ATTRIBUTABLE TO

SHAREHOLDERS AT BEGINNING
OF YEAR (Note 10) $906,124 $831,121 $1,775,835

INCREASE (DECREASE) IN NET ASSETS

ATTRIBUTABLE TO SHAREHOLDERS
FROM OPERATIONS (Note 10) (159,220) 256,241 (131,012)

TRANSACTIONS WITH SHAREHOLDERS

Issuances of shares during the year (Note 10) 146,181 136,790 150
Redemption of shares during the year (Note 10) (55,217) (318,028) (813,852)
Net increase from transactions with shareholders 90,964 (181,238) (813,702)

NET ASSETS ATTRIBUTABLE TO

SHAREHOLDERS AT END OF YEAR
(Note 10) $837,868 $906,124 $831,121

See accompanying Notes to Financial Statements.

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ATRAM ASIAPLUS EQUITY FUND, INC.
STATEMENTS OF CASH FLOWS

Years Ended December 31

2018 2017 2016

CASH FLOWS FROM OPERATING

ACTIVITIES
Net investment income (loss) before income tax ($159,215) $257,330 ($131,011)
Adjustments for:
Net fair value (gain) loss on financial assets at
fair value through profit or loss (Note 7) 147,931 (270,816) 112,319
Interest income (Note 6) (35) – (4)
Dividend income (Note 7) (13,116) (14,304) (4,534)
Net investment loss before working capital changes (24,435) (27,790) (23,230)
Increase (decrease) in accounts payable and
accrued expenses (6,997) (2,548) (7,283)
Net cash flows used in operations (31,432) (30,338) (30,513)
Proceeds from disposal of financial assets at fair
value through profit or loss (Note 7) 208,584 827,061 1,606,281
Acquisitions of financial assets at fair value
through profit or loss (Note 7) (303,108) (639,463) (824,422)
Dividends received 13,962 43,959 4,513
Interest received 35 – 4
Income taxes paid (1,094) – (1)
Net cash flows provided by operating activities (113,053) 201,219 755,862

CASH FLOWS FROM FINANCING

ACTIVITIES
Proceeds from issuance of shares (Note 10) 146,181 136,790 150
Payments for redemption of shares (Note 10) (55,217) (318,028) (813,852)
Net cash flows used in financing activities 90,964 (181,238) (813,702)

NET INCREASE (DECREASE) IN

CASH IN BANKS (22,089) 19,981 (57,840)

CASH IN BANKS AT BEGINNING OF YEAR 82,957 62,976 120,816

CASH IN BANKS AT END OF YEAR (Note 6) $60,868 $82,957 $62,976

See accompanying Notes to Financial Statements.

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ATRAM ASIAPLUS EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS

1. Corporate Information

ATRAM AsiaPlus Equity Fund, Inc. (the “Fund”) is a stock corporation duly registered with the
Securities and Exchange Commission on January 31, 2008, under SEC Registration
No. CS200801020. The Fund is an open-end investment company, i.e., a mutual fund under the
Investment Company Act of 1960 or R.A. 2629. The Fund’s primary investment objective is to
invest and reinvest mainly in a diversified portfolio of high-quality equity securities listed on the
Philippine Stock Exchange and other international stock exchanges, and in high-quality offshore-
domiciled funds invested in high-quality equity securities listed in other countries, and thereby
provide investors returns consisting of dividend income and capital growth through investments in
such securities, and sell, transfer, or otherwise dispose of shares of stock, and generally to carry on
the business of an open-end investment company in all the elements and details thereof. As an open-
end investment company, the Fund stands ready to redeem shares by shareholders at any time upon
request of the latter at the prevailing net asset value (NAV) per share at the time of redemption.

The following are the major shareholders of the Fund and their corresponding shareholdings as at
December 31:

2018 2017
Phil Scan Travel & Tours Inc. 28.59% 31.54%
BDO Private Bank, Inc. Wealth Advisory and Trust
Group as Fiduciary for Various Trust and
Investment Management Accounts 19.38% 25.77%
RCBC Savings Bank Trust Services Division, 10.11% 11.16%
Unicapital Securities, Inc. FAO various clients 10.11% –
Samson, Emmanuel L. 5.22% 5.76%
Mapa, Cornelio Jr. 4.72% 5.21%

The Fund has no employee. The Fund’s management, distribution, administration, transfer agency
and general clerical services are handled by ATR Asset Management, Inc. (ATRAM). Deutsche
Bank AG Manila acts as the Fund’s accountant.

The Fund’s registered office address, which is also its principal place of business, is 8th floor, 8
Rockwell Building, Hidalgo Drive, Rockwell Center, Makati City.

2. Basis of Preparation

The accompanying financial statements have been prepared on a historical cost basis except for
financial assets at fair value through profit or loss (FVPL), which have been measured at fair value.
The financial statement are presented in US Dollar ($), the Fund’s functional currency. All amounts
are adjusted to the nearest dollar except when otherwise indicated.

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Statement of Compliance
The financial statements of the Fund are presented in compliance with Philippine Financial Reporting
Standards (PFRS).

3. Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year, except for
the following new and amended PFRS and Philippine Accounting Standards (PAS) which became
effective beginning January 1, 2018. The adoption of these new and amended standards did not have
any significant impact on the Fund’s assets and liabilities or performance.

∂ Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based

Payment Transactions
∂ Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part of Annual
Improvements to PFRSs 2014 - 2016 Cycle)
∂ Amendments to PAS 40, Investment Property, Transfers of Investment Property
∂ Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance Consideration
∂ PFRS 9, Financial Instruments
PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, Financial
Instruments: Recognition and Measurement, and all previous versions of PFRS 9. The standard
introduces new requirements for classification and measurement, impairment, and hedge
accounting. Retrospective application is required, but providing comparative information is not
compulsory. For hedge accounting, the requirements are generally applied prospectively, with
some limited exceptions.

Effective January 1, 2018, the Fund has adopted the new standard and the comparative
information was not restated.

To adhere with the Fund’s business model and contractual cash flows characteristics of the
financial assets, the Fund continue measuring at fair value through profit or loss all financial
assets currently held at fair value. The Fund expects no significant impact on the statement of
assets and liabilities arising from expected credit losses as the Fund’s receivables are normally
being settled within three (3) to five (5) days, while the cash in banks and cash equivalents are on
demand.

The Fund has no outstanding hedging transactions as of the adoption date.

• PFRS 15, Revenue from Contracts with Customers

PFRS 15 supersedes PAS 11 Construction Contracts, PAS 18 Revenue and related Interpretations
and it applies, with limited exceptions, to all revenue arising from contracts with customers.
PFRS 15 establishes a five-step model to account for revenue arising from contracts with
customers and requires that revenue be recognized at an amount that reflects the consideration to
which an entity expects to be entitle in exchange for transferring goods or services to a customer.

PFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts
and circumstances when applying each step of the model to contracts with their customers. The
standard also specifies accounting for the incremental costs of obtaining a contract and the costs
directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

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The Fund adopted PFRS 15 using the modified retrospective method of adoption with the date of
initial application of January 1, 2018. Therefore, the comparative information was not restated
and continued to be reported under PAS 11, PAS 18 and related interpretations.

Under the modified retrospective method, the standard can be applied either to all contracts at the
date of initial application or only to contracts that are not completed at this date. The Fund
elected to apply the standard to all contracts as at January 1, 2018.

The adoption of PFRS 15 has no significant impact on the Fund’s financial statements since
Fund’s revenue comprise of interest income, trading and foreign exchange gains which are
outside the scope of PFRS 15 (scoped in under PFRS 9).

Future Changes in Accounting Policies

Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the Fund
does not expect that the future adoption of the said pronouncements to have a significant impact on its
financial statements. The Fund intends to adopt the following pronouncements when these become
effective.

Effective beginning on or after January 1, 2019

∂ Amendments to PFRS 9, Prepayment Features with Negative Compensation
∂ PFRS 16, Leases
∂ Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or Settlement
∂ Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures
∂ Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments
∂ Annual Improvements to PFRSs 2015-2017 Cycle
∂ Amendments to PFRS 3, Business Combinations, and PFRS 11, Joint Arrangements,
Previously Held Interest in a Joint Operation
∂ Amendments to PAS 12, Income Tax Consequences of Payments on Financial Instruments
Classified as Equity
∂ Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization

Effective beginning on or after January 1, 2020

∂ Amendments to PFRS 3, Definition of a Business
∂ Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies,
Changes in Accounting Estimates and Errors, Definition of Material

Deferred effectivity
∂ Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture

4. Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and other cash items, and other highly liquid debt securities
with original maturities of three (3) months or less from dates of placements and that are subject to
insignificant risk of changes in value. These are carried in the statement of assets and liabilities at
face amount and earn interest based on the prevailing interest rates.

Financial Instruments
In the current period, the Fund has adopted PFRS 9, Financial Instruments. Comparative figures for

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the year ended December 31, 2017 have not been restated. Therefore, financial instruments in the
comparative period are still accounted for in accordance with PAS 39, Financial Instruments:
Recognition and Measurement.

Date of recognition
The Fund recognizes a financial asset or a financial liability in the statement of assets and liabilities
when it becomes a party to the contractual provisions of the instrument. Purchases or sales of
financial assets that require delivery of assets within the time frame established by regulation or
convention in the marketplace are recognized on the trade date – the date on which the Fund commits
to purchase or sell the asset.

Initial recognition of financial instruments

All financial instruments are initially measured at fair value. Except for financial assets and financial
liabilities valued at FVTPL, the initial measurement of financial instruments includes transaction
costs.

Classification and Subsequent Measurement of financial instruments (policy applicable beginning

January 1, 2018)

Financial assets are classified in their entirety based on the contractual cash flows characteristics of
the financial assets and the Fund’s business model for managing financial assets. The Fund classifies
its financial assets into the following categories: financial assets at FVTPL, FVOCI and AC.

Financial assets measured at amortized cost

Financial assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest (SPPI), and that are not designated at FVTPL, are measured
at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss
allowance recognized and measured. Interest income from these financial assets is included in
‘Interest income’ using the effective interest rate method. Financial assets at amortized cost include
cash and cash equivalents and receivables as at January 1, 2018 and December 31, 2018.

Financial assets at FVOCI

Financial assets that are held for collection of contractual cash flows and for selling the assets, where
the assets’ cash flows represent solely payments of principal and interest, and that are not designated
at FVTPL, are measured at fair value through other comprehensive income. Movements in the
carrying amount are taken through other comprehensive income, except for the recognition of
impairment gains or losses, interest revenue and foreign exchange gains and losses which are
recognized in the statement of total comprehensive income. When the financial asset is derecognized,
the cumulative gain or loss previously recognized in other comprehensive income is reclassified from
equity to profit or loss. As at January 1, 2018 and December 31, 2018, the Fund has no financial
assets under the FVOCI category.

Financial assets at FVTPL

Financial assets that do not meet the criteria for amortized cost or FVOCI and the collection of
contractual cash flows is only incidental to achieving the Fund’s business model objective are
measured at FVTPL. A gain or loss on debt securities that is subsequently measured at FVTPL and is
not part of a hedging relationship is recognized in profit or loss and presented in the statement of total
comprehensive income under Fair value gains (losses), net on financial assets at FVTPL in the period
in which it arises. As of December 31, 2018, the Fund’s FVPL securities amounted to $786,120
(Note 7).

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Classification and Subsequent Measurement of financial instruments (policy applicable prior to

January 1, 2018)

Financial instruments within the scope of PAS 39 are classified as either financial assets or liabilities
at fair value through profit or loss (FVPL), loans and receivables, held-to-maturity (HTM)
investments, AFS financial assets and other financial liabilities. The classification depends on the
purpose for which the investments were acquired and whether they are quoted in an active market.
Management determines the classification of its financial assets at initial recognition and, where
allowed and appropriate, re-evaluates this designation at every report date.

Financial instruments are recognized initially at fair value of the consideration given (in case of an
asset) or received (in the case of a liability). The fair values of the consideration given are determined
by reference to the transaction price or other market prices. If such market prices are not reliably
determinable, the fair value of the consideration given is estimated as the sum of all future cash
payments or receipts, discounted using the prevailing market rates of interest for similar instruments
with similar maturities. The initial measurement of financial instruments, except for those designated
at FVPL, includes transaction costs.

The subsequent measurement bases for financial instruments depend on its classification. As of
December 31, 2017, the financial instruments of the Fund are classified as financial assets at FVPL,
loans and receivables and other financial liabilities.

Financial assets or financial liabilities at FVPL

This category consists of financial assets or financial liabilities that are held-for-trading or designated
by management as at FVPL on initial recognition. Derivatives instruments, except those covered by
hedge accounting relationships, are classified under this category.

Financial assets and financial liabilities at FVPL are recorded in the statement of assets and liabilities
at fair value, with changes in the fair value recorded in the statement of comprehensive income,
included under “Net fair value gain (loss) on financial assets at fair value through profit or loss”.
Interest earned is recorded in the statement of comprehensive income under “Interest income”.

Financial assets or financial liabilities classified in this category are designated by management on
initial recognition when the following criteria are met:

∂ the designation eliminates or significantly reduces the inconsistent treatment that would otherwise
arise from measuring the assets or liabilities or recognizing gains or losses on them on a different
basis;
∂ the assets and liabilities are part of a group of financial assets, financial liabilities or both which
are managed and their performance evaluated on a fair value basis, in accordance with a
documented risk management or investment strategy; or
∂ the financial instrument contains an embedded derivative, unless the embedded derivative does
not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be
separately recorded.

As of December 31, 2017, the Fund’s financial assets at FVPL amounted to $839,527 (Note 7).

Loans and receivables

These loans and receivables are non-derivative financial assets with fixed or determinable payments
and fixed maturities that are not quoted in an active market. They are not entered into with the
intention of immediate or short-term resale and are not classified as financial assets held-for-trading,
designated as financial assets or FVPL.

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After initial measurement, “Loans and receivables” are subsequently measured at amortized cost
using the effective interest rate (EIR) method, less allowance for impairment. Amortized cost is
calculated by taking into account any discount or premium on acquisition and fees and costs that are
an integral part of the EIR. The amortization is included in “Interest income” in the statement of
profit or loss. The losses arising from impairment are recognized in “Provision for credit losses” in
the statement of profit or loss.

This accounting policy relates to the statement of assets and liabilities caption “Cash and cash
equivalents” and “Receivables”.

Other financial liabilities

Issued financial instruments or its components, which are not designated at FVPL are classified as
other financial liabilities, where the substance of the contractual arrangement results in the Fund
having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the
obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed
number of own equity shares.

After initial measurement, other financial liabilities are measured at amortized cost using the EIR
method. Amortized cost is calculated by taking into account any premium or discount on the issue
and fees that are an integral part of the EIR. Any effects of restatement of foreign currency-
denominated liabilities are recognized in the statement of comprehensive income.

This accounting policy applies primarily to “Accounts payable and accrued expenses”, excluding
statutory liabilities.

Classification of Financial Instruments Between Debt and Equity

A financial instrument is classified as debt if it provides for a contractual obligation to:

∂ deliver cash or another financial asset to another entity; or

∂ exchange financial assets or financial liabilities with another entity under conditions that are
potentially unfavorable to the Fund; or
∂ satisfy the obligation other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of own equity shares.

If the Fund does not have an unconditional right to avoid delivering cash or another financial asset to
settle its contractual obligation, the obligation meets the definition of a financial liability. The
components of issued financial instruments that contain both liability and equity elements are
accounted for separately, with the equity component being assigned the residual amount, after
deducting from the instrument as a whole the amount separately determined as the fair value of the
liability component on the date of issue.

Impairment of Financial Assets

Policy applicable beginning January 1, 2018
The Fund holds only trade receivables with no financing component and which have maturities of
less than 12 months at amortized cost and, as such, has chosen to apply an approach similar to the
simplified approach for expected credit losses (ECL) under IFRS 9 to all its trade receivables.
Therefore the Fund does not track changes in credit risk, but instead recognizes a loss allowance
based on lifetime ECLs at each reporting date.

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The Fund’s approach to ECLs reflects a probability-weighted outcome, the time value of money and
reasonable and supportable information that is available without undue cost or effort at the reporting
date about past events, current conditions and forecasts of future economic conditions.

Policy applicable prior to January 1, 2018

The Fund assesses at each date of statement of assets and liabilities whether there is objective
evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of
financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as
a result of one or more events that has occurred after the initial recognition of the asset (an incurred
‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the
financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment
may include indications that the borrower, or a group of borrowers, is experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the probability that they
will enter bankruptcy or other financial reorganization and where observable data indicate that there
is measurable decrease in the estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.

Financial assets carried at amortized cost

The Fund first assesses whether objective evidence of impairment exists individually for financial
assets that are individually significant, or collectively for financial assets that are not individually
significant. If the Fund determines that no objective evidence of impairment exists for individually
assessed financial asset, whether significant or not, it includes the asset in a group of financial assets
with similar credit risk characteristics and collectively assesses for impairment. Assets that are
individually assessed for impairment and for which an impairment loss is, or continues to be,
recognized are not included in a collective assessment for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value of the estimated
future cash flows. The carrying amount of the asset is reduced through the use of an allowance
account and the amount of loss is charged against the statement of comprehensive income. If, in a
subsequent period, the amount of the estimated impairment loss decreases because of an event
occurring after the impairment was recognized, the previously recognized impairment loss is
reversed. Any subsequent reversal of an impairment loss is recognized in the statement of
comprehensive income, to the extent that the carrying value of the asset does not exceed its amortized
cost at the reversal date.

Derecognition of Financial Assets and Liabilities

Financial asset (policy applicable prior to and beginning January 1, 2018)
A financial asset is derecognized when:
∂ the rights to receive cash flows from the asset have expired; or
∂ the Fund retains the right to receive cash flows from the asset, but has assumed an obligation to
pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or
∂ the Fund has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained the risk and rewards of the asset but has transferred the control over the asset.

Financial liability (policy applicable prior to and beginning January 1, 2018)

A financial liability is derecognized when the obligation under the liability is discharged or cancelled
or has expired.

*SGVFS034737*
 -8-

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of
assets and liabilities when there is either a legal right to set off the recognized amounts and there is an
intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is
based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:

∂ In the principal market for the asset or liability, or

∂ In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Fund.

The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic
best interest.

Financial assets
The fair value for financial instruments traded in active markets at the reporting date is based on their
quoted price or binding dealer price quotations, without any deduction for transaction costs.
Securities defined in these accounts as ‘listed’ are traded in an active market. For all other financial
instruments not traded in an active market, the fair value is determined by using valuation techniques
deemed to be appropriate in the circumstances. Valuation techniques include the market approach
(i.e., using recent arm’s length market transactions adjusted as necessary and reference to the current
market value of another instrument that is substantially the same) and the income approach (i.e.
discounted cash flow analysis and option pricing models making as much use of available an
supportable market data as possible).

Fair value hierarchy

The Fund uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:
∂ Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the
entity can access at the measurement date;
∂ Level 2: inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly or indirectly; and
∂ Level 3: unobservable inputs for the asset or liability.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Fund
determines whether transfers have occurred between levels in the hierarchy by reassessing
categorization (based on the lowest-level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Fund has determined classes of assets and liabilities
based on the nature, characteristics and risks of the asset or liability and the level of the fair value
hierarchy as explained above.

*SGVFS034737*
 -9-

NAV Per Share

NAV per share is computed by dividing net assets attributable to shareholders by the total number of
shares issued and outstanding as of report date.

Capital Stock Transactions

Sale of fund shares are recorded by crediting capital stock at par value and additional paid-in capital
(APIC) for the amount received in excess of the par value; redemptions are recorded by debiting
those accounts. The deficit account is increased by redemptions in excess of original investments.
Deficit represents the cumulative losses of the Fund, net of dividend distributions.

Revenue Recognition
Revenue is recognized to the extent that is probable that future economic benefits will flow to the
Fund and the revenue can be reliably measured. The Fund assesses its revenue arrangements against
specific criteria in order to determine if it is acting as principal or agent. The Fund has concluded that
it is acting as principal in all of its revenue agreements. The following specific recognition criteria
must be met before revenue is recognized:

Interest income
Interest income is recognized as it accrues using the EIR method.

Dividend income
Dividend income is recognized when the Fund’s right to receive the payment is established.

Fair value gains (losses) on financial assets at FVTPL

Fair value gains (losses) on financial assets at FVTPL represents gains and losses arising from trading
activities, including changes in the fair values of financial assets at FVTPL.

Expenses
Expenses constitute cost of administering the business. These expenses are recognized as incurred.

Distribution fees
Distribution fees are the amounts payable to the distributors of the Fund’s shares which includes
ATRAM and outside distributors. Distribution and administration fees are also based on the NAV of
the Fund computed on a daily basis.

Management fees
Management fees pertain to the amount payable to the Fund’s investment manager for the
management of its operations. Management fee is based on the NAV of the Fund computed on a
daily basis.

Service fees
Service fees pertain to the amount payable to the Fund’s investment manager for the general clerical
services

Custodian fees
Custodian fees pertain to the amount payable to the custodian of the Fund’s shares. Custodian fees
are also based on the NAV of the Fund computed on a daily basis.

*SGVFS034737*
 - 10 -

Transfer agent fees

Transfer agent fees pertain to the amount payable to the Fund’s transfer agent for the transfer agency
service which includes, but are not limited to, monitoring and issuance of stock certificates, record
keeping and preparation of reports to government agencies. Fees to stock transfer agent is also based
on the NAV of the Fund computed on a daily basis and is subject to a minimum monthly fee.

Taxes and licenses

Taxes and licenses pertain primarily to documentary stamps required for subscriptions and trading
transactions. This account also includes payments for municipal license and permits.

Directors’ fees
Directors’ fees pertain to per diem of the directors of the Fund.

Income Tax
Current tax
Current tax assets and liabilities for the current periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the
amount are those that have been enacted or substantively enacted at the date of statement of assets
and liabilities.

Deferred tax
Deferred tax is provided using the balance sheet liability method on all temporary differences at the
report date between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, with certain exceptions.
Deferred tax assets are recognized for all deductible temporary differences, unused net operating loss
carryover (NOLCO) and unused tax credits for the excess of Minimum Corporate Income Tax
(MCIT) over Regular Corporate Income Tax (RCIT), to the extent that it is probable that future
taxable income will be available against which the deductible temporary differences, unused NOLCO
and tax credits from excess MCIT can be utilized. Deferred tax, however, is not recognized when it
arises from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting income nor taxable
income.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient future taxable income will be available to allow all,
or part of, the deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are applicable to the period when
the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the date of statement of assets and liabilities.

Provisions
Provisions are recognized when the Fund has a present obligation (legal or constructive) as a result of
a past event and where it is probable that an outflow of assets embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are reviewed at each reporting date and adopted to reflect the current best estimate. If the
effect of the time value of money is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessment of the time value of money
and, where appropriate, the risk specific to the liability. Where discounting is used, the increase in

*SGVFS034737*
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the provision due to the passage of time is recognized as an interest expense in the statement of
comprehensive income.

Contingencies
Contingent liabilities are not recognized but are disclosed in the financial statements unless the
possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are
not recognized but are disclosed in the financial statements when an inflow of economic benefits is
probable.

Earnings Per Share

Earnings per share is computed by dividing net income for the year by the weighted average number
of common shares outstanding during the year.

Events After the Reporting Date

Any post-year-end event that provides additional information about the Fund’s position at the date of
statement of assets and liabilities (adjusting events) is reflected in the financial statements. Any post-
year-end event that is not an adjusting event is disclosed in the financial statements when material.

5. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the accompanying financial statements in compliance with PFRS requires the
Fund to make judgments, estimates and assumptions that affect the reported amounts of assets,
liabilities, income and expenses and disclosure of contingent assets and contingent liabilities. Future
events may occur which will cause the assumptions used in arriving at the estimates to change. The
effects of any change in judgments and estimates are reflected in the financial statements as they
become reasonably determinable. Judgments and estimates are continually evaluated and are based
on historical experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances.

Judgments and estimates are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the
circumstances.

Determining functional currency

The Fund determined its functional currency to be the U.S. Dollar by considering the currency that
mainly influences the sales prices for its services, which is generally the currency the services are
denominated and settled, and the currency of the country whose competitive forces and regulations
mainly determine the sales prices of its services. The Fund also considers the currency in which
receipts from operating activities are usually retained.

Going concern
The management of the Fund has made an assessment of the Fund’s ability to continue as a going
concern and is satisfied that the Fund has the resources to continue in business for the foreseeable
future. Furthermore, the Fund is not aware of any material uncertainties that may cast significant
doubts upon the Fund’s ability to continue as a going concern. Therefore, the financial statements
continue to be prepared on a going concern basis.

*SGVFS034737*
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Estimates
Recognition of deferred tax assets
The Fund reviews the carrying amounts of deferred tax assets at each reporting date and reduces these
to the extent that it is no longer probable that sufficient future taxable income will be available to
allow all or part of the deferred tax assets to be utilized. Significant management judgment is
required to determine the amount of deferred tax assets that can be recognized, based upon the likely
timing and level of future taxable income together with future tax planning strategies. Unrecognized
deferred tax assets amounted to $77,453 and $104,980 as of December 31, 2018 and 2017,
respectively (see Note 11).

6. Cash in Banks

Cash in banks earns interest at the prevailing bank deposit rates. Interest income arising from cash in
banks amounted to $35, nil and $4 in 2018, 2017 and 2016, respectively.

7. Financial Assets at FVTPL

This account consists of global exchange traded funds amounting to $786,120 and $839,527 in 2018
and 2017, respectively.

The rollforward analysis of financial assets at FVTPL follows:

2018 2017
Balance at beginning of year $839,527 $756,309
Additions 303,108 639,463
Fair value gains (loss) – net (147,931) 270,816
Disposals (208,584) (827,061)
Balance at end of year $786,120 $839,527

Dividend income from securities amounted to $13,116, $14,304 and $4,534 in 2018, 2017 and 2016,
respectively.

8. Receivables

This account consists of accrued dividend income from investments in global exchange traded funds,
which is to be settled within three to five days from the dividend declaration date.

*SGVFS034737*
 - 13 -

9. Accounts Payable and Accrued Expenses

This account consists of:

2018 2017
Accrued Expenses:
Legal and audit $4,692 $4,861
Custodian fees (Note 14) 107 6,088
Distribution fees (Note 12) 606 650
Fund accounting fees (Note 14) 352 1,202
Service fees (Note 12) 201 –
Management fees (Note 12) 29 436
Withholding taxes 2,129 1,890
Income tax payable (Note 11) – 1,089
Others 1,259 1,245
$9,375 $17,461

Accrued expenses payable consist mainly of accruals on investment management fees, distribution,
service fees, professional fees and custodian fees.

10. Net Assets Attributable to Shareholders

Capital Management
As an open-end investment company, the Fund’s primary objective of capital management is to
maximize net assets attributable to shareholders. Sales of the Fund’s shares are recorded by crediting
capital stock at par value and APIC for the amount received in excess of the par value; redemptions
are recorded by debiting those accounts. The retained earnings account is reduced by redemptions in
excess of original investment. The Fund’s capital, consisting entirely of common shares, is variable
and increases or decreases depending on the volume of subscriptions and redemptions made by its
shareholders. As an investment company, the Fund stands ready to redeem shares by shareholders
anytime upon request of the latter at the prevailing NAV per share at the time of redemption.

The Fund has 200,000,000 authorized shares of common stock, with par value of one centavo
=0.01 per share, as of December 31, 2018 and 2017. The movements of the total outstanding number
P
of shares subscribed are as follows:

2018 2017 2016

Balance at beginning of year 817,571 993,417 1,994,893
Issuances during the year 132,923 62,997 180
Redemptions during the year (48,730) (238,843) (1,001,656)
Balance at end of year 901,764 817,571 993,417

As of December 31, 2018 and 2017, the Fund does not have any outstanding long-term debt. The
Fund’s outstanding liabilities as of December 31, 2018 and 2017 are short term in nature.

The Fund is subject to the =

P50,000,000 minimum initial paid-up capital as required by R.A. 2629.

*SGVFS034737*
 - 14 -

The Fund considers the net asset attributable to shareholders as its capital. The details of the net
assets attributable to shareholders are as follows:

2018 2017 2016

Capital stock $225 $209 $244
APIC 1,819,263 1,728,315 1,909,518
Deficit (981,620) (822,400) (1,078,641)
$837,868 $906,124 $831,121

The rollforward analysis of capital stock follows:

2018 2017 2016

Balance at beginning of year $209 $244 $455
Issuances during the year 25 12 –
Redemptions during the year (9) (47) (211)
Balance at end of year $225 $209 $244

The rollforward analysis of APIC follows:

2018 2017 2016

Balance at beginning of year $1,728,315 $1,909,518 $2,723,009
Proceeds from issuances in excess
of par 146,156 136,778 150
Cost of redemptions in excess
of par (55,208) (317,981) (813,641)
Balance at end of year $1,819,263 $1,728,315 $1,909,518

The rollforward analysis of retained earnings follows:

2018 2017 2016

Deficit at beginning of year ($822,400) ($1,078,641) ($947,629)
Increase (decrease) in net assets
attributable to shareholders
from operations (159,220) 256,241 (131,012)
Deficit at end of year ($981,620) ($822,400) ($1,078,641)

NAV per share is computed as follows:

2018 2017 2016

a. Net assets attributable to
shareholders $837,868 $906,124 $831,121
b. Number of shares outstanding 901,764 817,571 993,417
NAV per share (a/b) $0.9291 $1.1083 $0.8366

*SGVFS034737*
 - 15 -

Earnings (losses) per share is computed as follows:

2018 2017 2016

a. Increase (decrease) in net
assets attributable to
shareholders from operations ($159,220) $256,241 ($131,012)
b. Weighted average number of
shares outstanding during the
year 872,080 938,243 1,052,308
Earnings (losses) per share (a/b) ($0.1826) $0.2731 ($0.1245)

11. Income Tax

Income taxes include corporate income tax, as discussed below, and final income taxes paid at the
rate of 15% which is withheld on gross interest income from savings deposits - foreign currency
denominated unit.

A reconciliation of the statutory income tax to the effective income tax follows:

2018 2017 2016

Statutory income tax ($47,765) $77,199 ($39,303)
Tax effects of:
Non-taxable loss (income) 43,185 (64,571) 26,631
Unrecognized deferred tax
assets on NOLCO 4,590 – 12,674
Interest income subjected to
final tax (5) – (1)
Application of NOLCO against
taxable income – (12,628) –
Excess MCIT – 1,089 –
Provision for income tax $5 $1,089 $1

The details of Fund’s NOLCO and MCIT as at December 31, 2018 are as follows:

2018 2017
Year Incurred Expiry Year NOLCO MCIT NOLCO MCIT
2018 2021 $15,300 $‒ $‒ $‒
2017 2020 – – ‒ 1,089
2016 2019 242,877 – 242,877 –
2015 2018 – – 103,427 –
$258,177 $– $346,304 $1,089
Expired 2018 $103,427 $– – $–
Expired 2017 – – $51,541 –

The related deferred tax assets from NOLCO and excess MCIT amounting to $77,453 and $104,980
as of December 31, 2018 and 2017, respectively, have not been recognized because the Fund believes
that there will be no future taxable income against which the benefit from NOLCO and excess MCIT
can be utilized. The Fund assesses the unrecognized deferred tax assets and will recognize a

*SGVFS034737*
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previously unrecognized deferred tax asset to the extent that it has become probable that future
taxable income will allow all, or part of, these deferred tax assets to be recovered.

12. Related Party Transactions

Parties are related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions; and
the parties are subject to common control or common significant influence. Related parties may be
individuals or corporate entities.

Related party transactions consist mainly of management and other fees paid in accordance with the
management agreement with ATRAM.

The Fund has an investment advisory agreement with ATRAM to act as its investment advisor. The
latter provides administrative support to the Fund. ATRAM also serves as the distributor of the Fund.

The significant balances arising from the foregoing agreement with ATRAM as of and for the years
ended December 31, 2018 and 2017 are as follows:

2018
Amount Outstanding
Volume Balance Terms Conditions
Affiliate
Service fees
Distribution Fees $7,653 $606 Payable on demand; Unsecured;
non-interest bearing
Management fees 2,794 29 Payable on demand; Unsecured;
non-interest bearing
Service fees 2,334 201 Payable on demand; Unsecured;
non-interest bearing
$12,781 $836

2017
Amount/ Outstanding
Category Volume Balance Terms Conditions
Service fees
Distribution Fees $7,935 $650 Payable on demand; Unsecured;
non-interest bearing
Management fees 5,304 436 Payable on demand; Unsecured;
non-interest bearing
Transfer agent fees 2,503 – Payable on demand; Unsecured;
non-interest bearing
$15,742 $1,086

Distribution fees are fees payable to ATRAM, the Principal Distributor, and/or eligible sales agents or
securities dealers for expenses associated with the distribution of shares having a monthly fee based
on the average daily net assets of the Fund. Effective February 1, 2018, the applicable annual rate is
0.75%.

Management fees are payable to ATRAM for its management services to the Fund having a monthly
fee based on the average daily net assets of the Fund. Effective February 1, 2018, the Fund changed
the applicable annual rate from 0.50% to 0.25%.

*SGVFS034737*
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Service fees pertain to the amount payable to the Fund’s investment manager for the general clerical
services. Service fee is also based on the NAV of the Fund computed on a daily basis. The monthly
fee is at an annual rate of 0.25% starting February 1, 2018.

Transfer agent fees are fees payable to ATRAM for the transfer agency service which includes, but
are not limited to, monitoring and issuance of stock certificates, record keeping and preparation of
reports to government agencies. Fees to stock transfer agent is also based on the NAV of the Fund
computed on a daily basis and is subject to a minimum monthly fee.

13. Financial Risk Management Objectives and Policies

The Fund has established risk management and control with clear terms of reference with the
responsibility from developing policies on market, credit, liquidity and operational risk. The
objectives of the Fund’s risk framework are to maintain the integrity of the investment portfolio by
timely and responsive risk management and to optimize asset utilization in order to attain the highest
possible risk-adjusted returns over time. The Fund recognizes risk recognition as an essential first
step in the investment selection process.

Risk Management Structure

Board of directors (BOD)

The BOD identifies key risk areas and key performance indicators and monitor these factors with due
diligence.

Audit committee
The audit committee through the internal auditor performs independent internal audit function
through which the BOD, senior management and stockholders shall be provided with reasonable
assurance that its key organizational and procedural controls are effective, appropriate and complied
with.

Compliance officer
The compliance officer shall identify, monitor and control the compliance risks.

Fund manager
The Fund manager sets guidelines, policies and procedures governing investment responsibilities to
ensure that investment decisions are carried out in a manner that best addresses risk and return, within
the objectives and parameters allowed by the BOD.

Fair Values of Financial Instruments

As at December 31, 2018 and 2017, the fair value of FVPL securities under Level 1 hierarchy
amounted to $786,120 and $839,527, respectively (Note 7).

There have been no reclassifications from Level 1 to other categories in 2018 and 2017.

*SGVFS034737*
 - 18 -

The following methods and assumptions were used to estimate the fair value of each class financial
instrument for which it is practicable to estimate such value:

(a) Financial assets

Due to the short-term nature of cash and cash equivalents and receivables, the fair value
approximates the carrying amount. Financial assets at FVPL are carried at fair value which is
based generally on quoted market prices. If the market prices are not readily available, fair values
are estimated using values obtained from independent parties.

Other financial liabilities

Due to the short-term nature of accounts payable and expenses (excluding withholding taxes and
income tax payable), the fair value approximates the carrying amount.

Financial Risk Management

Financial risks come mainly from market, interest rate, credit and liquidity risks. The Fund is
exposed to financial risk through its financial instruments. The value of mutual funds is not
guaranteed and will change from day to day according to the market value of the individual securities
in the portfolio. Securities fluctuate in value for a number of reasons, including economic conditions,
interest rates, government regulations and taxation, and corporate performance. As a result, the
investment in the Fund may at any time be worth more or less than the original investment. The Fund
manager manages each type of financial risk as summarized below:

Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in its price, in turn caused by changes in interest rates, foreign currency exchange
rates, equity prices and other market factors. The Fund is exposed to this risk as it carries financial
assets at FVPL.

Equity price risk

Equity price risk is the risk that future cash flows will fluctuate because of changes in market prices
of individual stocks.

The Fund’s equity price risk exposure relates to equity shares classified as financial assets at FVPL.
To minimize the risk involved, the Fund diversified its investments by sticking to the 15% limit of
NAV on any single issuer of securities per SEC Memo Circular No. 12, Series of 2013. The Fund has
complied with this limit as of December 31, 2017 and 2016.

Foreign currency risk

Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates.

The Fund has transactional currency exposures. Such exposure arises from its transactions in
currencies other than the functional currency.

*SGVFS034737*
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The Fund’s foreign currency-denominated financial assets and liabilities are as follows:

2018
U.S. Dollar Philippine
Equivalent Peso
Financial assets
Cash and cash equivalents $1,117 =58,732
P
Financial liabilities
Accounts payable and accrued expenses 359 18,876
Net asset (liability) $758 P39,856
=
*The exchange rate used in 2018 was US$1 to =
P52.58.

2017
U.S. Dollar Philippine
Equivalent Peso
Financial assets
Cash and cash equivalents $1,554 =77,591
P
Financial liabilities
Accounts payable and accrued expenses 1,210 60,415
Net asset (liability) $344 P17,178
=
*The exchange rate used in 2017 was US$1 to =
P49.93.

The analysis below is performed for reasonably possible movements in key variables with all
other variables held constant, showing the impact on income before income tax (due to changes
in fair value of currency sensitive monetary assets and liabilities). There is no other impact on
the Fund’s equity other than those already affecting the statement of income.

Impact on income
Currency Change in variable before income tax
2018 PHP +3.58% 26
PHP -3.58% (26)

2017 PHP +3.54% 12

PHP -3.54% (12)

Reasonably possible movements in foreign exchange rates are computed based on average
percentage changes in the Philippine Dealing & Exchange Corporation (PDEx) closing rate for
the past three (3) years.

Interest rate risk

Interest rate risk is the risk that the value/future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Fund does not have significant exposure to interest
rate risk as its receivables and payables are non-interest bearing and short term in nature.

Credit risk
Credit risk is the risk that a credit loss event will occur because of the failure of the Fund’s customers,
clients, or counterparties to fulfill their contractual obligations, resulting in the credit-impairment of
financial assets.

The Fund does not have significant exposure to credit risk for cash in banks and receivable as of
December 31, 2018 and 2017.

*SGVFS034737*
 - 20 -

As of December 31, 2018 and 2017, there are no past due or impaired financial assets.

The carrying amount of cash in banks and receivables best represent the maximum exposure to credit
risks.

Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with
financial liabilities. This may result from either an investment that may have to be disposed at a
substantial loss because the Fund may not find a ready buyer or the Fund’s inability to generate cash
inflows as anticipated. The Fund is exposed to cash redemptions of its issued shares. To reduce this
risk, the Fund’s policy is to stay away from securities which do not have a ready market and which
are very volatile.

As of December 31, 2018 and 2017, the Fund’s accounts payable and accrued expenses are all
payable on demand.

The breakdown of assets and liabilities by undiscounted contractual maturity and settlement dates as
of December 31, 2018 and 2017 follows:

2018 2017
Due Within Due Beyond Due Within Due Beyond
One (1) Year One (1) Year Total One (1) Year One (1) Year Total
Financial Assets
Cash in bank $60,868 $– $60,868 $82,957 $– $82,957
Accounts receivable 255 – 255 1,101 – 1,101
$61,123 $– $61,123 $84,058 $– $84,058
Financial liabilities
Accounts payable and
accrued expenses 7,246 – 7,246 14,482 – 14,482
Net Financial Assets $53,877 $– $53,877 $69,576 $– $69,576

14. Operating Agreements

On July 2010, the Fund entered into a Fund Accounting Service and Custody Agreement with
Deutsche Bank AG Manila. The Fund shall pay Deutsche Bank AG Manila for fund accounting
services equivalent to 0.06% of the daily NAV or minimum monthly fee of P =10,000 which shall be
billed directly against the Fund. The Fund agrees to pay all fees, charges and obligations incurred
from time to time for any services pursuant to the custodian agreement

The significant balances arising from the foregoing agreement with Deutsche Bank AG Manila as of
and for the years ended December 31, 2018 and 2017 are shown below.

(a) Service fees recognized in the statements of comprehensive income follows:

2018 2017 2016

Fund accounting fees $2,279 $2,382 $2,562
Custodian fees 1,286 2,298 2,392
$3,565 $4,680 $4,954

*SGVFS034737*
 - 21 -

(b) Outstanding liabilities related to the service fees follow:

2018 2017 2016

Custodian fees $107 $6,088 $8,831
Fund accounting fees 352 1,202 1,858
$459 $7,290 $10,689

As of December 31, 2018 and 2017, the Fund has outstanding cash balances with Deutsche Bank
AG Manila amounting to $23,647 and $82,957, respectively.

15. Approval of the Financial Statements

The accompanying financial statements of the Fund were authorized for issue by the BOD on
April 13, 2019.

16. Supplementary Tax Information Required Under Revenue Regulations 15-2010

The Fund reported and / or paid the following taxes in 2018:

Value Added Tax (VAT)

The NIRC of 1997 provides for the imposition of VAT on sales of goods and services. RA No. 9337
increased the VAT rate from 10.0% to 12.0%, effective February 1, 2006.

The Fund has no input and output VAT recorded since there are no vatable transactions entered into
during the year.

Taxes and Licenses

Details consist of the following:

Business permit $991 =50,043

P
Documentary stamp tax 1 36
$992 =50,079
P

Withholding Taxes
The withholding taxes of the Fund pertain to expanded withholding taxes which amounted to $2,405
(P
=126,740) in 2018.

Tax Assessments and Cases

As at December 31, 2018, the Fund has no pending preliminary and final tax assessment notice. In
addition, the Fund has no pending tax cases within and outside the administration of the BIR.

*SGVFS034737*