PERFORMANCE GUIDE

APS Alpha Fund
Pay Only If We Perform


1. The Fund with no management and administrative fees

Did you know that fund managers charge various costs to you? It is in the fine print!

Unlike any other unit trusts, the APS Alpha Fund does not charge annual management and administrative fees. These can sometimes amount to 2.5 % or more, which are taken out from your capital every year.

APS absorbs all expenses which are normally charged to investors, namely, management fee, trustee fee, administration fee, accounting and valuation fees, custodian and depository fees, registrar fee, legal and professional fees, audit fee, printing and distribution costs, and other setup costs.

2. How does the fee work?

In order for APS to qualify for the payment of the Performance Fee in any PF Period, the appreciation in the gross value per Unit during that PF Period must exceed the non-cumulative annual hurdle rate of 6% (the “Hurdle”) in annualised terms. In addition, the gross value per Unit at the end of that PF Period must be higher than the High Water Mark in order for a Performance Fee to be payable.

A “PF Period” for each Unit is a period commencing from the initial date the Unit is issued and ending at the close of business on (1) the 31st day of every December, or (2) the date the Unit is realised, whichever is the earlier, and thereafter, each PF Period commences on the day following the last day of the preceding PF Period for the Units and ending at the close of business on (1) the 31st day of every December, or (2) the date the Unit is realised, whichever is the earlier.

For each PF Period, the Performance Fee in respect of each Unit will be equal to 25% (or 30% for the PF Period ending on or before 31 December 2003) of the appreciation in the gross value per Unit above its High Water Mark during that PF Period. The High Water Mark is the highest of (1) the gross value per Unit at the time of issue of that Unit; (2) the highest gross value per Unit in respect of which a Performance Fee has been paid at the end of any previous PF Period (if any) during which such Unit was in issue; or (3) the gross value per Unit at the beginning of that PF Period. The following are examples of how the High Water Mark is ascertained:

Illustration of Applicable High Water Mark

(The following examples assume the Fund has only one unit holding.)

	1 Jan 04	31 Dec 04	1 Jan 05	31 Dec 05
Gross value per Unit	1.0000	1.0405	1.0405	1.1235

• Annualised Return for 2004 = [(1.0405/1) – 1] = 4.05% (< 6% hurdle)
• Therefore, no Performance Fee is paid for 2004
• High Water Mark for 2005 = $1.0405
• Annualised Return for 2005 = [(1.1235/1.0405) – 1] = 7.98% (> 6% hurdle)
• Performance Fee for 2005 = 25% x (1.1235 – 1.0405) = $0.0208

	1 Jan 04	31 Dec 04	1 Jan 05	31 Dec 05
Gross value per Unit	1.0000	1.0605	1.0454	1.1090

• Annualised Return for 2004 = [(1.0605/1) – 1] = 6.05% (> 6% hurdle)
• Performance Fee for 2004 = 25% x (1.0605 – 1.0000) = $0.0151
• High Water Mark for 2005 = $1.0605
• Annualised Return for 2005 = [(1.1090/1.0454) – 1] = 6.08% (> 6% hurdle)
• Performance Fee for 2005 = 25% x (1.1090 – 1.0605) = $0.0121

	1 Jan 04	31 Dec 04	1 Jan 05	31 Dec 05
Gross value per Unit	1.0000	0.9350	0.9350	1.0010

• Annualised Return for 2004 = [(0.9035/1.0000) – 1] = -9.65% (< 6% hurdle)
• Therefore, no Performance Fee is paid for 2004
• High Water Mark for 2005 = $1.0000
• Annualised Return for 2005 = [(1.0010/0.9035) – 1] = 10.79% (> 6% hurdle)
• Performance Fee for 2005 = 25% x (1.0010 – 1.0000) = $0.0003

For the purpose of determining whether the Hurdle has been exceeded, the performance of the Fund in the form of the Annualised Return of each Unit as at the end of the relevant PF Period (which shall be expressed as a percentage) shall be rounded to two (2) decimal places.

Illustration of Annualised Return

The following examples relate to an investor who has held Units in the fund for an entire year.

	Buying price on 01.01.XY	Selling price on 31.12.XY	Return	Annualised Return	Performance Fee Payable?
Example 1	S$ 100	S$ 112	12%	12%	Yes, as the Annualised Return exceeds the annual hurdle rate of 6%
Example 2	S$ 100	S$ 104	4%	4%	No, as the Annualised Return is below the annual hurdle rate of 6%

In example 1, at the end of a calendar year, the Fund achieves an Annualised Return of 12%. The investor has to pay the applicable Performance Fee to APS as the investor receives an Annualised Return above 6%.

In example 2, at the end of a calendar year, the Fund achieves and Annualised Return of 4%. The investor does not pay any Performance Fee, as the Fund’s Annualised Returns do not exceed 6% in that calendar year.

No matter when an investor buys or sells the Units, the principle “Pay only if we perform” always applies as the returns are always annualised and compared to the 6% p.a. hurdle rate for each Unit, as shown below.

The following examples relate to an investor who has held Units in the Fund for a period of only 6 months.

	Buying price on 01.01.XY	Selling price on 30.06.XY	Return	Annualised Return	Performance Fee Payable?
Example 3	S$ 100	S$ 112	12%	24%	Yes as the Annualised Return exceeds the annual hurdle rate of 6%
Example 4	S$ 100	S$ 104	4%	8%	Yes as the Annualised Return exceeds the annual hurdle rate of 6%

In example 3, after 6 months, the Fund achieves a return of 12%, which is equivalent to a 24% Annualised Return. Therefore APS is entitled to the Performance Fee as the Annualised Return for that PF Period exceeds the Hurdle.

In example 4, after 6 months, the Fund achieves a return of 4%, which is equivalent to an 8% Annualised Return. Therefore APS is entitled to the Performance Fee as the Annualised Return for that PF Period exceeds the Hurdle.

3. When do I pay the fee?

You pay fees at the end of every calendar year or when you redeem your investments, whichever is the earlier, provided that the Annualised Return is above 6% for that calendar year. The fees are calculated by the Administrator of the fund and reflected in your NAV.

At the beginning of each new calendar year, we will once again begin to compare the performance of the fund against the 6% p.a. hurdle rate. This ensures that we strive to beat the 6% p.a. hurdle every year.

If the investor exits the fund anytime before the last day of the calendar year, the investor would also have to pay the fee, if his/her annualised gains exceed 6% for that calendar year. The fee payable will be calculated over the relevant period.

When you sell part of the units you hold in the fund, the FIFO (First In-First Out) rule applies. In order to calculate the fee payable, if any, it is assumed that you will sell the units that you bought first.

If you want to know, at any point in time, what your units are worth and whether a performance fee is payable, please contact your financial advisor or use the online calculator at www.apsalphafund.com.