scotiabank money market fund financial … · scotiabank money market fund statement of changes in...

SCOTIABANK MONEY MARKET FUND

FINANCIAL STATEMENTS

DECEMBER 31, 2013

CONTENTS Page

1) >B89D9B89BG 5H8>GCEfF E9DCEG 1

2) STATEMENT OF FINANCIAL POSITION 2

3) STATEMENT OF COMPREHENSIVE INCOME 3

4) STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS 4OF REDEEMABLE PARTICIPATING SHARES

5) STATEMENT OF CASH FLOWS 5

6) NOTES TO FINANCIAL STATEMENTS 6 - 20

DECEMBER 31, 2013


INDEX TO FINANCIAL STATEMENTS

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STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED DECEMBER 31, 2013

(Expressed in United States dollars)

The accompanying notes on are an integral part of these financial statements.

- 3 -

2013 2012IncomeInterest income $ 499,034 $ 814,565Net realized gain on financial assets at fair value through profit or loss 8,124 10,985

Total net income 507,158 825,550

ExpensesManagement fees (Note 4) 438,707 716,717Professional fees 25,595 24,710Other expenses 16,382 28,543

Total operating expenses 480,684 769,970

Operating profit 26,474 55,580

Increase in net assets from operations attributableto holders of redeemable participating shares $ 26,474 $ 55,580


STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLETO HOLDERS OF REDEEMABLE PARTICIPATING SHARES




- 4 -

Increase in Totalnet assets from net assets

operations attributable toattributable to redeemable

redeemable participatingparticipating shareholders

Share Share shareholders (at redemptionCapital Premium (Note 7) value) (Note 7)

Balance as at December 31, 2011 $ 161,661 $ 193,747,588 $ 17,171,478 $ 211,080,727

Issue of redeemable participating shares 129,502 168,988,677 - 169,118,179Redemption of redeemable participating shares (129,444) (168,909,745) - (169,039,189)Increase in net assets from operations

attributable to holders of redeemableparticipating shares - - 55,580 55,580

Balance as at December 31, 2012 161,719 193,826,520 17,227,058 211,215,297

Issue of redeemable participating shares 107,443 140,230,614 - 140,338,057Redemption of redeemable participating shares (150,238) (196,084,979) - (196,235,217)Increase in net assets from operations

attributable to holders of redeemableparticipating shares - - 26,474 26,474

Balance as at December 31, 2013 $ 118,924 $ 137,972,155 $ 17,253,532 $ 155,344,611


STATEMENT OF CASH FLOWS




- 5 -

2013 2012

Cash flows from operating activitiesInterest received $ 1,224,846 $ 1,420,844Operating expenses paid (505,479) (794,056)Purchase of financial assets at fair value through profit and loss (740,024,658) (746,525,262)Proceeds from sale and maturity of financial assets at

fair value through profit and loss 782,415,134 761,757,694

Net cash provided by operating activities 43,109,843 15,859,220

Cash flows from financing activitiesProceeds from subscriptions of redeemable participating shares 151,051,238 155,978,992Payments for redemption of redeemable participating shares (196,427,066) (168,794,424)

Net cash (used in) financing activities (45,375,828) (12,815,432)

Net change in cash and cash equivalents (2,265,985) 3,043,788

Cash and cash equivalents at beginning of year 3,145,768 101,980

Cash and cash equivalents at end of year $ 879,783 $ 3,145,768


NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2013

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1. Incorporation and Principal Activities

ScotiabR_\ F`_Vj FRc\Ve ?f_U 'eYV nCompanyo) was incorporated in the Cayman Islands on October 27, 1999 andis registered under The Mutual Funds Law (revised) of the Cayman Islands. The Company is an open-endedinvestment company which may issue and redeem its shares at a price based on the underlying net asset value. Theaddress of the registered office is Scotia Centre, 6 Cardinal Avenue, P.O. Box 501, Grand Cayman KY1-1106. The<`âR_jqd redeemable participating shares are listed on the Cayman Islands Stock Exchange, the Dutch CaribbeanStock Exchange, and are registered for distribution in Trinidad and Tobago and in Jamaica.

The Company invests in United States Dollar denominated term deposits and commercial paper issued bycorporations in North America.

It is not the intention of the Company to pay dividends and any earnings and profits will be reinvested.

On Cf]j /0) /--4) LTèZRSR_\ & Mcfde '<Rj^R_( EeU+ 'eYV nFR_RXVco( Raa`Z_eVU LeReV LecVVe <Rj^R_ McfdeCompany, Ltd. as sub-administrator 'eYV nLfS-AdmZ_ZdecRe`co( and State Street Bank and Trust Company asTfdeÙZR_ 'eYV n<fdeÙZR_o(.

2. Significant Accounting Policies

The principal accounting policies applied in the preparation of these financial statements are set out below. Thesepolicies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation:

The financial statements of the Company have been prepared in accordance with International Financial ReportingStandards (nIFRSo) as issued by the International Accounting Standards Board. The financial statements have beenprepared under the historical cost convention, as modified by the revaluation of financial assets and financialliabilities (including derivative financial instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accountingestimates. It also requires the Board of Directors to exercise its judgment in the process of applying the Companyqdaccounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions andestimates are significant to the financial statements are disclosed in Note 9.

All references to net assets throughout this document refer to net assets attributable to holders of redeemableparticipating shares unless otherwise stated. Net assets per share information as disclosed in the Statement ofFinancial Position for participating shares as disclosed in Note 7 has been determined as total assets less totalliabilities (excluding net assets attributable to holders of redeemable participating shares) divided by the number ofoutstanding shares.


NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013

- 7 -

2.2. Significant Accounting Policies (continued)

(a) Standards and amendments to existing standards effective January 1, 2013 that are adopted by the Company

B?KL .0) p?RZc gR]fV ^VRdfcV^V_eq, is effective for annual periods beginning on or after January 1, 2013.The standard improves consistency and reduces complexity by providing a precise definition of fair valueand a single source of fair value measurement and disclosure requirements for use across IFRSs. Therequirements do not extend the use of fair value accounting but provide guidance on how it should beapplied where its use is already required or permitted by other standards within IFRS. If an asset or aliability measured at fair value has a bid price and an ask price, the standard requires valuation to be basedon a price within the bid-ask spread that is most representative of fair value and allows the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient forfair value measurement within a bid-ask spread. The Companyqdqd valuation inputs for listed financial assetsand liabilities utilizes last traded prices for the calculation of its per share trading value for subscriptions andredemptions. The use of last traded prices is recognised as a standard pricing convention within the industry.Although the adoption of the standard required additional disclosures, the new standard did not have asignificant impact on the C`âR_jqd WZ_R_TZR] a`dZeZ`_) aVcW`c^R_TV `c UZdT]`dfcVd+

9^V_U^V_ed e` B?KL 4) p=ZdT]`dfcVd m HWWdVeeZ_X WZ_R_TZR] RddVed R_U WZ_R_TZR] ]ZRSZ]ZeZVdq) effective forannual periods beginning on or after January 1, 2013, require additional disclosures to enable users offinancial statements to evaluate the effect or the potential effects of netting arrangements, including rights ofset-`WW Rdd`TZReVU hZeY R_ V_eZejqd cVT`X_ZdVU financial assets and recognised financial liabilities, on theV_eZejqd WZ_R_TZR] a`dZeZ`_+ MYV R^V_U^V_ed UZU _è YRgV R_j ZâRTe `_ eYV Companyqd WZ_R_TZR] a`dZeZ`_ `cperformance. At December 31, 2013 and 2012, there are no assets and liabilities that are subject tooffsetting, enforceable under master netting agreement.

B?KL .-) p<`_d`]ZUReVU WZ_R_TZR] deReV^V_edq) isis effective for annual periods beginning on or after January 1,2013 and builds on existing principles by identifying the concept of control as the determining factor inwhether an entity should be included within the consolidated financial statements of the parent company.The standard provides additional guidance to assist in the determination of control where this is difficult toassess. The new standard did not YRgV R_j ZâRTe `_ eYV <`âR_jqd WZ_R_TZR] a`dZeZ`_ `c aVcW`c^R_TV+

B?KL ./) p=ZdT]`dfcVd `W Z_eVcVded Z_ èYVc V_eZeZVdq) isis effective for annual periods beginning on or afterJanuary 1, 2013 and includes the disclosure requirements for all forms of interests in other entities, includingjoint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The newstandard did not YRgV R_j ZâRTe `_ eYV <`âR_jqd WZ_R_TZR] a`dZeZ`_ `c aVcW`c^R_TV.

There are no other standards, interpretations or amendments to existing standards that are effective that would beexpected to have a material impact on the Company.



DECEMBER 31, 2013

- 8 -


(b) New standards, amendments and interpretations issued but not effective for the financial year beginning January1,1, 2013,3, and not early adopted

B?KL 6) p?Z_R_TZR] Z_decf^V_edq) daVTZWZVd Y`h R_ V_eZej dY`f]U T]RddZWj R_U ^VRdfcV WZ_R_TZR] RddVed R_Uliabilities, including some hybrid contracts. The standard improves and simplifies the approach forclassification and measurement of financial assets compared with the requirements of IAS 39. Most of therequirements in IAS 39 for classification and measurement of financial liabilities were carried forwardunchanged. The standard applies a consistent approach to classifying financial assets and replaces thenumerous categories of financial assets in IAS 39, each of which had its own classification criteria. Thestandard is not expected to have a significant impact on the Companyqd WZ_R_TZR] a`dZeZ`_ `c aVcW`c^R_TV) Rdit is expected that the Company will continue to classify its financial assets and financial liabilities (bothlong and short) as being at fair value through profit or loss.

Amendments to IFRS 10 and IFRS 12 for investment entities, effective for periods beginning on or afterJanuary 1, 2014, will result in many investment funds and similar entities being exempt from consolidatingmost of their subsidiaries. Instead, such entities will measure eYVZc pdfSdZUZRcZVdq Re WRZc gR]fV eYc`fXY ac`WZe`c ]`dd+ MYV R^V_U^V_ed XZgV R_ ViTVaeZ`_ e` V_eZeZVd eYRe ^VVe R_ pZ_gVde^V_e V_eZejq UVWZ_ZeZ`_ R_U hYZTYdisplay particular characteristics. Changes have also been made to IFRS 12 to introduce disclosures that anZ_gVde^V_e V_eZej _VVUd e` ^R\V+ MYV _Vh deR_URcU Zd _è ViaVTeVU e` YRgV R_j ZâRTe `_ eYV <`âR_jqdcurrent consolidation conclusions.

9^V_U^V_ed e` B9L 0/) pHWWdVeeZ_X WZ_R_TZR] RddVed R_U WZ_R_TZR] ]ZRSZ]ZeZVdq Zd VWWVTeZgV W`c R__fR] periodsbeginning on or after January 1, 2014. These amendments clarify the offsetting criteria in IAS 32 andaddress inconsistencies in their application. This includes T]RcZWjZ_X eYV ^VR_Z_X `W pTfccV_e]j YRd R ]VXR]]jenforceable right of set-`WWq R_U eYRe dome gross settlement systems may be considered equivalent to netsettlement. The amendments are not expected to YRgV R_j ZâRTe `_ eYV <`âR_jqd WZ_R_TZR] a`dZeZ`_ `cperformance.

There were no other standards, interpretations or amendments to existing standards that are not effective that wouldbe expected to have a significant impact on the Company.

Valuation of financial assets at fair value through profit or loss: MYV <`âR_jqd Z_gVde^V_ed RcV T`_dZUVcVUtrading securities and consequently categorized as financial assets at fair value through profit or loss. Financial assetsat fair value through profit or loss are initially recognized at fair value, which is considered the cost basis of thefinancial assets. The Company records security transactions on a trade date basis, recognizing the cost or salesproceeds of financial assets sold or purchased on an average cost basis. Financial assets are valued on the valuationdate at fair value, using data provided by one or more reputable third party pricing vendors which is in turn basedupon (1) last traded price on the exchange upon which such financial assets are traded, (2) valuation models usingobservable market inputs, or (3) prices quoted by the principal market makers for non-exchange traded financialassets. Management evaluates the reliability of the pricing data received at each report date. All related realized gainsand losses are recognized in the Statement of Comprehensive Income as income as they occur.



DECEMBER 31, 2013

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2. Significant Accounting Policies (continued)

Functional and presentation currency: BeV^d Z_T]fUVU Z_ eYV <`âR_jqd WZ_R_TZR] deReV^V_ed RcV ^VRdfcVU fdZ_XeYV TfccV_Tj `W eYV acZ^Rcj VT`_`^ZT V_gZc`_^V_e Z_ hYZTY Ze àVcReVd 'eYV nWf_TeZ`_R] TfccV_Tjo(+ MYZd Zd eYV N_ZeVULeReVd =`]]Rc 'nNL=o() hYZTY cVW]VTed eYV <`âR_jqd acZ^Rcj RTeZgZej `W Z_gVdeZ_X Z_ NL= UV_`^Z_ReVU eVc^deposits and commercial paper issued by corporations in North America. The Company has adopted the USD as itspresentation currency.

Accounting for investments and investment income: Security transactions are accounted for on a trade date basis.Realized gains and losses on sales of financial assets are calculated on an average cost basis. Interest is recognized inthe Statement of Comprehensive Income using the effective yield method and includes discount accreted andpremium amortized over the remaining period to maturity of individual assets.

Redeemable participating shares and management shares: Redeemable participating shares 'eYV nKVUVV^RS]VParticipating SharVdo( are redeemable at the dYRcVY`]UVcqd àeZ`_ R_U RcV T]RddZWZVU Rd WZ_R_TZR] ]ZRSZ]Zties. Anydistribution on such Redeemable Participating Shares is recognized in the Statement of Comprehensive Income asfinance costs. The Redeemable Participating Shares can be put back to the Company by the holder at any dealing dayfor cash equal to a proportionate share of the respectZgV <`âR_jqd _Ve RddVed+ MYV KVUVV^RS]V IRceZTZaReZ_X Lharesare carried at the redemption amount that would be payable at the dealing date if the shareholder exercised its right toput the share back to the Company. Management shares 'eYV nFR_RXV^V_e LYRcVdo( are not redeemable, and do notparticipate in the net income or dividends of the Company Rd aVc eYV <`âR_jqd RceZT]Vd `W Rdd`ciation.

Interest income: Interest income on financial assets is accrued on a daily basis. Interest income on financial assetsincludes interest and discount earned (net of premium), which is the difference between the face value and theoriginal cost, including original issue discount, amortized using the effective yield method over the term of thefinancial assets.

Expenses: Expenses directly attributable to the Company are recorded on an accrual basis.

Translation of foreign currency amounts: Assets and liabilities denominated in currencies other than the USD'nW`cVZX_ TfccV_TZVdo( RcV ecR_d]ReVU Re eYV cReVd acVgRZ]Z_X `_ eYV gR]fReZ`_ UReV R_U ViTYR_XV UZfferences arereflected in the Statement of Comprehensive Income in the period in which they arise. Transactions in foreigncurrencies are translated at prevailing exchange rates at the date of the transaction. The Company does not isolate thatportion of the results of operations resulting from changes in foreign exchange rates on investments from thefluctuations arising from changes in market prices of financial assets held. Such fluctuations are included with the netrealized gain or loss on financial assets at fair value through profit and loss.

Cash and cash equivalents: For the purposes of the Statement of Cash Flows, cash and cash equivalents comprisecash, fixed term deposits with original maturity of less than 90 days.

Capital risk management: The capital of the Company is represented by the net assets attributable to holders ofRedeemable Participating Shares. The amount of net asset attributable to holders of Redeemable Participating Sharescan change significantly on a daily basis as the Company is subject to daily subscriptions and redemptions at thediscretion of shareholders. The Companyqd `S[VTeZgV hYV_ ^R_RXZ_X capital is to safeguard the Companyqd RSZ]Zej e`continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and tomaintain a strong capital base to support the development of the investment activities of the Company. In order to^RZ_eRZ_ `c RU[fde eYV TRaZeR] decfTefcV) eYV <`âR_jqd a`]ZTj Zd e` aVcW`c^ eYV W`]]`hZ_X7



DECEMBER 31, 2013

- 10 -


Capital risk management (continued)

Monitor the level of daily subscriptions and redemptions relative to the liquid assets and adjusts the amountof distributions the Company pays to redeemable shareholders.

Redeem and issue new shares in accordance with the constitutional documents of the Company, whichinclude the ability to restrict redemptions and require certain minimum holdings and subscriptions.

The Board of Directors and Portfolio Manager (defined in Note 6) monitor capital on the basis of the value of netassets attributable to Redeemable Participating Shares.

3.3. Financial Assets at Fair Value through Profit or Loss

At December 31, 2013 and 2012 the financial assets comprised the following debt securities:

2013 2012Fair Value Fair Value

Corporate Commerical Paper 33,471,327 45,034,762Government T-bills 24,089,372 78,715,211Corporate Bonds and Notes 94,189,363 71,166,276Interest receivable 305,343 247,320

$ 152,055,405 $ 195,163,569

The following summarizes the investment portfolio segregated by country of issuer.

Financial Assets at fair value Fair Value% of total

portfolio Fair Value% of total

portfolio

Australia -$ 0.00% 2,905,642$ 1.49%

Canada 123,279,547 81.08% 171,708,620 87.98%United States 28,775,858 18.92% 20,549,307 10.53%

Total financial assets at

fair value through profit or loss 152,055,405$ 100.00% 195,163,569$ 100.00%

2013 2012



DECEMBER 31, 2013

- 11 -

3. Financial Assets at Fair Value through Profit or Loss (continued)

At December 31, 2013, the portfolio consisted of 40 positions (2012: 37) in corporate commercial paper, governmenttreasury bills, corporate bonds and notes. The current coupon rates on the commercial paper, government treasurybills, corporate bonds and notes, ranged from 0.001% to 5.13% (2012: 0.001% to 5.45%). The weighted averagematurity of the portfolio using the next reset yield date as maturity date on Floating Rate Holdings is 67 days (2012:51 days). The most significant issuer was the Canadian Wheat Board, Canada. No one position or issuer accountsfor more than 19.11% (2012: 24.48%) of the portfolio value. All investments are denominated in USD and all issuersare located in North America (2012: North America and Australia).

4. Management Agreement

Under the terms of the management agreement dated November 1, 1999, the Company appointed the Manager tomanage the affairs and investments of the Company subject to the overall supervision and control of the Board ofDirectors of the Company.

The Manager has responsibility for the general administration of the Company, but has delegated the performance ofmost tasks to third parties.

The Manager is entitled to a WVV 'eYV n^R_RXV^V_e WVVo( Re cReVd UZdT]`dVU Z_ eYV eRS]V SV]`h. All such fees areaccrued daily and paid quarterly in arrears. Out of these fees, the Manager is required to pay the fees of the PortfolioManager, Investment Advisor, Custodian, Sub-Administrator and any other person to whom functions are delegatedby the Manager on a monthly basis.

The Manager is entitled to a management fee from the classes of Redeemable Participating Shares as listed below:

Class Management fee per annumA up to 0.60%NU NILIU NIL

The Manager may choose to absorb other expenses incurred, paid or accrued by the Company in their ordinary andusual course of business. Such expenses may include, but are not limited to, administration costs (including but notlimited to the cost of printing and distributing periodic reports and statements), interest on borrowed funds, auditingexpenses, legal expenses, custodians, sub-custodians and escrow agents and the annual registration fee payable in theCayman Islands. Except for investment management, the Manager has subcontracted third party service providers toperform these services. The Manager has agreed to a reduced fee given the low yields of the Company.

As at December 31, 2013 of the total management fee paid to the Manager of $438,707 (2012: $716,717), $278,571(2012: $300,992) was paid to other service providers. The management fee retained by the Manager in the year for itsservices was $160,136 (2012: $415,725). Of the total management fees that were due at December 31, 2013 of$120,276 (2012: $145,653), $40,528 (2012: $94,629) were due to the Manager for its services.

Under the Distributorship Agreement (see Note 5 below), the Manager is entitled to receive a sales commission inrespect of the issue of shares, but is responsible for any fees and commissions payable by the Company to distributorsof shares and for promotional costs. As per addendum dated August 24, 2011, the Manager has waived all trailingcommissions in the Company. The Manager is also entitled to retain any redemption fees charged on the Redemptionof Participating Shares.



DECEMBER 31, 2013

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5. Distributorship Agreement

Under the terms of the distributorship agreement dated November 1, 1999, the Manager, Scotiabank & Trust'<Rj^R_( EeU+ 'eYV n=ZdecZSfe`co( Zd cVda`nsible for the distribution of Redeemable Participating Shares of theCompany in accordance with the terms of the Prospectus. The Distributor is entitled to all initial subscription chargeslevied against subscribers. The subscription charge is levied solely at the discretion of the Manager at up to 5% of thetotal amount paid by the subscriber for shares. During the year ended December 31, 2013, $NIL (2012: $NIL)subscription charges were levied and paid to the Distributor.

6. Other Related Party Transactions

Scotia Asset Management LP 'eYV nPortfolio FR_RXVco( acts Rd eYV <`âR_jqd Portfolio Manager. At December 31,2013, the Manager held 1,000 Management Shares (2012: 1,000). All fees payable to the portfolio manager are beingborne by the Manager.

LTèZR <RddV]d B_gVde^V_e <`f_dV] EZ^ZeVU 'eYV nB_gVde^V_e 9UgZd`co( RTed Rd eYV <`âR_jqd B_gVde^V_e Advisor.For the year ended December 31, 2013, Investment Advisor fees were $157,730 (2012: $173,768). All fees payableto the Investment Advisor are being borne by the Manager.

7. Share Capital2013 2012

Authorized:1,000 Management Shares of $1.00 par value each $ 1,000 $ 1,000100,000,000 Redeemable Participating Shares of $0.01 par value each 1,000,000 1,000,000

$ 1,001,000 $ 1,001,000

Total units issued or redeemed during the year and the corresponding share capital and share premium amounts canbe summarized as follows:

Management Shares Units $ Units $

Beginning of year - - 1,000 -Shares issued during the year - - - -Shares redeemed during the year - - - -

End of year - - 1,000 -

20122013



DECEMBER 31, 2013

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7. Share Capital (continued)

Redeemable Participating Shares Units $ Units $

Class ABeginning of year 16,171,924 193,988,239 16,166,120 193,909,249Shares issued during the year 10,744,190 140,338,057 12,950,212 169,118,179Shares redeemed during the year (15,023,793) (196,235,217) (12,944,408) (169,039,189)

End of year 11,892,321 138,091,079 16,171,924 193,988,239

Class IUBeginning of year - - - -Shares issued during the year 100 1,000 - -Shares redeemed during the year - - - -

End of year 100 1,000 - -

2013 2012

The Management Shares are held exclusively by the Manager, who holds all the voting power of the Company but isentitled only to a return of capital in the event of liquidation.

Shares that are redeemed within 90 days of purchase may be subject to a redemption fee up to 2% of the redemptionamount. No redemption fees were levied during the year ended December 31, 2013 (2012: $NIL).

The initial subscription price of the Redeemable Participating Shares was $10.00 per share. Thereafter theRedeemable Participating Shares are issued and redeemable daily at a price equal to the net asset value per share onthe valuation day on which the notification is received, as long ad Ze Zd cVTVZgVU SVW`cV eYV <`^aR_jqs close ofbusiness. The net asset value per share for any valuation date is determined by dividing the value of the assets of therespective share class less its liabilities at the close of business on such valuation day by the number of RedeemableParticipating Shares outstanding of the share class on that date.

The initial offer price for class IU shares is $10.00. This new class will invest alongside the respective existingclasses of the Company and so is subject to the investment objectives and risks of the respective existing classes withthe same terms for subscription and redemption included in the Prospectus.

The Redeemable Participating Shares confer no voting rights and no entitlement to receive notice of, or attend at,general meetings of the Company. The Redeemable Participating Shares carry the right to participate in dividendsand all other distributions of the Company.

MYV <`^aR_jqd TRaZeR] Zd acZ^RcZ]j cVacVdV_eVU by these Redeemable Participating Shares. In accordance with theobjectives outlined in Note 1 and the risk management policies in Note 8, the Company endeavours to invest thesubscriptions received from redeemable participating shareholders into appropriate investments while maintainingsufficient liquidity to meet redemptions, such liquidity being augmented by short-term borrowings.



DECEMBER 31, 2013

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8. Financial Risk Management

MYV <`âR_jqd Z_gVde^V_e RTeZgZeZVd expose it to various types of risk which are associated with the financial assetsand markets in which it invests.

Price risk: As the Company operates as a money market fund none of its holdings are susceptible to any significantmarket fluctuations other than those described in interest rate risk and credit risk below.

All financial assets present a risk of loss of capital. The Portfolio Manager moderates this risk through a carefulselection of the assets within specified limits. Maximum risk resulting from financial assets is determined by the fairgR]fV `W eYV WZ_R_TZR] RddVed+ MYV <`âR_jqd `gVcR]] a`dZeZ`_d RcV ^`_Ze`cVU `_ R URZ]j SRdZd Sj eYV I`ceW`]Z`Manager.

Credit and concentration risk: Financial assets which potentially expose the Company to credit risk consist primarilyof cash and cash equivalents, investments in commercial paper, government bills, corporate bonds, and asset-backedsecurities. Investments in commercial paper, government bills, corporate bonds, and asset-backed securities, exposethe Company to the risk that an issuer will default on the payment of interest, principal or both. The extent of the<`âR_jqd Via`dfcV e` TcVUZe cZd\ Z_ cVdaVTe `W eYVdV WZ_R_TZR] RddVed RaacìZ^ReVd eYVZc TRccjZ_X gR]fV Rd cVT`cUVU Z_eYV <`âR_jqs Statement of Financial Position.

The Company seeks to mitigate its exposure to credit risk by adhering to investment guidelines which specify thetypes, maturities and concentrations of investments in which the Company can invest. Prior to entering intoinvestments in commercial paper or placing term deposits, the Portfolio Manager evaluates the creditworthiness ofthe respective counterparties.

The Company invests in financial assets, issued by companies which have an investment grade as rated by a well-known rating agency.

DBRS Rating2013 2012

R1 (high) 46.85% 41.83%

R1 (middle) 27.03% 40.38%

R1 (low) 14.01% 9.59%

AA (low) 2.90% 2.82%

N/A (Not rated) 9.21% 5.38%

Total 100.00% 100.00%

The clearing and depository operations for the Companyqd dVTfcity transactions are mainly concentrated with oneCustodian, namely State Street Bank and Trust Company. The Custodian is a member of a major securities exchangeand at December 31, 2013 had a credit rating from S&P of AA- (2012:AA-). The Company is subject to credit riskand possible losses should the Custodian be unable to fulfil its obligations to the Company. At December 31, 2013and 2012 substantially all cash and cash equivalents balances and financial assets at fair value through profit or lossare either held with or placed in custody with the Custodian.

Currency risk: Currency risk is the risk that movements in foreign currency rates relative to USD will have anunfavourable impact on the fair value of the financial instrumentqd W`cVZX_ TfccV_Tj Uenominated assets andliabilities.



DECEMBER 31, 2013

- 15 -

8. Financial Risk Management (continued)

Currency risk (continued): Changes in exchange rates between currencies or the conversion from one currency toanother may cause the value of the financial assets to diminish or increase. Currency exchange rates may fluctuateover short periods of time and are generally determined by supply and demand in the currency exchange markets andthe relative merits of investments in different countries, actual or perceived changes in interest rates and othercomplex factors. Currency exchange rates can be affected unpredictably by intervention (or the failure to intervene)by government or central banks, or by currency controls or political developments.

In accordance with the Companyqd a`]ZTj, the Portfolio Manager monitors the financial assets and liabilities exposureto currency risk.

Interest rate risk: MYV <`âR_jqd Z_eVcVde-bearing financial assets and liabilities expose it to risks associated with theeffects of fluctuations in the prevailing levels of market interest rates on its financial position and results ofoperations and cash flows.

LfSdeR_eZR]]j R]] `W eYV <`âR_jqd financial assets are in corporate bonds and notes, commercial paper securities, andother short term financial assets, therefore, the impact of changes in interest rates on the market values of thefinancial assets is significantly mitigated. However, the Company does have exposure to the effect of changes ininterest rates on yield of the financial assets.

The eRS]Vd SV]`h df^^RcZkV eYV <`âR_jqd Via`dfcV e` Z_eVcVde cReV cZd\+ Be Z_T]fUVd eYV <`âR_jqd WZ_R_TZR] RddVed

and liabilities, categorized by the earlier of contractual re-pricing or maturity dates:

At December 31, 2013

Non-interestUp to 1 year 1-5 years Over 5 years bearing Total

AssetsCash and cash equivalents - - - 879,783 879,783Financial assets at fair valuethrough profit or loss

Other assets - - - 2,608,878 2,608,878

Total Assets 126,955,696 24,794,366 - 3,794,004 155,544,066

Non-interestUp to 1 year 1-5 years Over 5 years Bearing Total

LiabilitiesOther liabilities - - - 198,455 198,455Redeemable Participating Shares - - - 155,344,611 155,344,611

Total Liabilities - - - 155,543,066 155,543,066

Interest sensitivity gap 126,955,696 24,794,366 - - -

152,055,405126,955,696 24,794,366 - 305,343



DECEMBER 31, 2013

- 16 -


Interest rate risk (continued):

At December 31, 2012

Non-interestUp to 1 year 1-5 years Over 5 years bearing Total

AssetsCash and cash equivalents - - - 3,145,768 3,145,768Financial assets at fair valuethrough profit or loss

Other assets - - - 13,325,135 13,325,135

Total Assets 171,808,626 23,107,623 - 16,718,223 211,634,472

Non-interestUp to 1 year 1-5 years Over 5 years Bearing Total

LiabilitiesOther liabilities - - - 418,175 418,175Redeemable Participating Shares - - - 211,215,297 211,215,297

Total Liabilities - - - 211,633,472 211,633,472

Interest sensitivity gap 171,808,626 23,107,623 - - -

171,808,626 23,107,623 - 247,320 195,163,569

At December 31, 2013, should interest rates have lowered by 25 basis points with all other variables remainingconstant and ignoring the effects of any management fee, the increase in net assets attributable to holders ofRedeemable Participating Shares for the year would have been approximately $123,826 (2012: $222,721) lower thanthe actual results, arising substantially from the lower yields that would be obtained on fixed income securities. Ifinterest rates had risen by 25 basis points with all other variables remaining constant and ignoring the effects of anymanagement fees, the increase in net assets attributable to holders of Redeemable Participating Shares would amountto approximately $123,826 (2012: $222,721) higher than the actual results, arising substantially from the higheryields that would be obtained on fixed income securities. This sensitivity analysis is applied to securities with alifespan of greater than 1 year at inception.

The sensitivity analysis presented is based upon the portfolio composition at December 31, 2013 and 2012. TheT`â`dZeZ`_ `W eYV <`âR_jqd investment portfolio may change over time. Accordingly, the sensitivity analysisprepared as at December 0.) /-.0 R_U /-./ Zd _è _VTVddRcZ]j Z_UZTReZgV `W eYV VWWVTe `_ eYV <`âR_jqd _Ve RddVed `Wfuture movements in the level of interest rates.

Liquidity risk: Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meetcommitments associated with financial instruments. Liquidity risk may result from an inability to sell a financialinstrument quickly close to its fair value.

All liabilities are due on demand or within one year.

The Company is exposed to daily cash redemptions of redeemable units+ MYV ^R[`cZej `W eYV <`âR_jqd financialassets mature within two months.



DECEMBER 31, 2013

- 17 -


Liquidity risk (continued): Under certain circumstances the Directors of the Company have the ability to suspend thedetermination of the net assets attributable to holders of Redeemable Participating Shares if it is considered in thebest interest of the shareholder group as a whole. During the suspension of the net assets attributable to holders ofRedeemable Participating Shares, the subscription and redemption of shares would also be suspended.

Fair values: At December 31, 2013 and 2012, investments are carried at fair value and the carrying amounts of allother assets and liabilities on the Statement of Financial Position approximated their fair values.

9. Fair Value Disclosure

IFRS 7 requires the Company to classify fair value measurements using a fair value hierarchy that reflects thesignificance of the inputs used in making the measurements.

The fair value hierarchy has the following levels:

l Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

l Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, eitherdirectly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

l Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)(Level 3).

Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reportingperiod.

The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety isdetermined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Forthis purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair valuemeasurement uses observable inputs that require significant adjustment based on unobservable inputs, thatmeasurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurementin its entirety requires judgment, considering factors specific to the asset or liability.

MYV UVeVc^Z_ReZ`_ `W hYRe T`_deZefeVd p`SdVcgRS]Vq cVbfZcVd dZX_ZWZTR_e [fUX^V_e Sj eYV Portfolio Manager. ThePortfolio Manager considers observable data to be that market data that is readily available, regularly distributed orupdated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in therelevant market.



DECEMBER 31, 2013

- 18 -

9. Fair Value Disclosure (continued)

The following tables analyze within the fair value hierarchy the Companyqd WZ_R_TZR] instruments (by class) measuredat fair value:

At December 31, 2013Total

Level 1 Level 2 Level 3 Balance

Financial assets at fair valuethrough profit and loss

Corporate Commercial Paper -$ 33,471,327$ -$ 33,471,327$

Government T-bills - 24,089,372 - 24,089,372Corporate Bonds and Notes - 94,189,363 - 94,189,363

Interest receivables - 305,343 - 305,343

Total financial assets at fair valuethrough profit and loss -$ 152,055,405$ -$ 152,055,405$

At December 31, 2012Total

Level 1 Level 2 Level 3 Balance

Financial assets at fair valuethrough profit and loss

Corporate Commercial Paper -$ 45,034,762$ -$ 45,034,762$

Government T-bills - 78,715,211 - 78,715,211Corporate Bonds and Notes - 71,166,276 - 71,166,276

Interest receivables - 247,320 - 247,320

Total financial assets at fair valuethrough profit and loss -$ 195,163,569$ -$ 195,163,569$

In relation to the above table, further details of the country classifications are disclosed in Note 3.

?Z_R_TZR] RddVed Re WRZc gR]fV eYc`fXY ac`WZe R_U ]`dd 'nZ_gVde^V_edo( whose values are based on quoted market pricesin active markets, and therefore classified within Level 1, would include active listed equities and most exchangetraded derivatives. The Company does not adjust the quoted price for these investments.

Investments that trade in markets that are not considered to be active but are valued based on quoted market prices,dealer quotations or alternative pricing sources supported by observable inputs would be classified within Level 2.These include commercial paper, U.S. T-bills, most investment-grade corporate bonds, investments in other fundswhere redemption is not restricted, certain non-U.S. sovereign obligations, thinly traded listed equities and someover-the-counter derivatives. As Level 2 investments include positions that are not traded in active markets and/or aresubject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which aregenerally based on available market information.

Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all.Level 3 assets would include private equity, certain restricted investments in other funds, and certain corporate debtsecurities. As observable prices are not available for these investments, if any such investments were held, theCompany would use valuation techniques to derive the fair value.

The Company does not hold any investments classified within Level 1 and Level 3 at December 31, 2013 and 2012.



DECEMBER 31, 2013

- 19 -


There were no transfers between Levels during the years ended December 31, 2013 and 2012.

Assets and liabilities not carried at fair value but for which fair value is disclosed

The following tables analyze within the fair value hierarchy the Companyqd RddVed R_U ]ZRSZ]ZeZVd 'Sj T]Rdd( _`emeasured at fair value as at December 31, 2013 and 2012, but for which fair value is disclosed.

As at December 31, 2013

AssetsCash and cash equivalents $ - $ 879,783 $ - $ 879,783Subscriptions receivable - 2,602,385 - 2,602,385Other receivables - 6,493 - 6,493

Total $ - $ 3,488,661 $ - $ 3,488,661LiabilitiesRedemptions payable $ - $ 52,941 $ - $ 52,941Other payables - 145,514 - 145,514Net assets attributable to holders of

redeemable shares - 155,344,611 - 155,344,611

Total $ - $ 155,543,066 $ - $ 155,543,066

Level 1 Level 2 Level 3 Total balance

As at December 31, 2012

AssetsCash and cash equivalents $ - $ 3,145,768 $ - $ 3,145,768Subscriptions receivable - 13,315,566 - 13,315,566Other receivables - 9,569 - 9,569

Total $ - $ 16,470,903 $ - $ 16,470,903LiabilitiesRedemptions payable $ - $ 244,790 $ - $ 244,790Other payables - 173,385 - 173,385Net assets attributable to holders of

redeemable shares - 211,215,297 - 211,215,297

Total $ - $ 211,633,472 $ - $ 211,633,472

Level 1 Level 2 Level 3 Total balance

The assets and liabilities included in the above tables are carried at amortized cost; their carrying values are areasonable approximation of fair value.

Cash and cash equivalents included cash in hand, deposits held with banks and other short-term investments.

Other receivables and payables represent the contractual amount and obligation due to and from the Fund.



DECEMBER 31, 2013

- 20 -


Assets and liabilities not carried at fair value but for which fair value is disclosed (continued)

The puttable value of redeemable shares is calculated based on the net difference between total assets and all otherliabilities of the Company in accordance with the Companyqd offering memorandum. These shares are not traded onan active market. A demand feature is attached to these shares) Rd eYVj RcV cVUVV^RS]V Re eYV Y`]UVcdq `aeZ`_ R_U TR_be put back to the Company at any dealing date for cash equal to a proportionate share of the Companyqd _Ve RddVevalue attributable to the share class. The fair value is based on the amount payable on demand, discounted from thefirst date that the amount could be required to be paid. The impact of discounting in this instance is not material. Assuch, Level 2 is deemed to be the most appropriate categorization for net assets attributable to holders of redeemableshares.

10. Taxation

The Company is not subject to any income, withholding or capital gains taxes in the Cayman Islands. Generally, theCompany intends to conduct its affairs so as not to be liable to taxation in any other jurisdiction; however, it mayinvest in securities whose income is subject to non-refundable foreign withholding taxes.

11. Subsequent Events

From January 1, 2014 to February 26, 2014, the Company received subscriptions of $2,377,339 and redemptions of$1,888,587.

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