SUZAKU Japan Long Short Fund

December 2015
Investment Objective and Strategy
Our investment objective is to maximise investment returns over the long term while accepting a level of risk that we believes is consistent with preservation
of capital. Our investment approach is primarily based on conducting bottom-up fundamental analysis, combined with overlay of top-down sector/factor
exposure management. We opportunistically utilise equity index futures and options to seek investment returns as well as to hedge portfolio positions.

Performance Summary (ClassA JPY Unrestricted

This month

Fund
5.17%

TOPIX Nikkei225 Mothers NikkeiJQ

-2.09% -3.61% 2.32% -1.07%

Since Inception

2.34%

16.66%

17.68%

-4.73%

Aug

Sep

Oct

13.96%

ClassA JPY
Net Return

2014
2015

Jan

-0.99%

Feb

Mar

Apr

-1.15%

-0.90%

-1.08%

Feb

Mar

Apr

May

1.68%

Jun

2.41%

Jul

-0.76%

0.79%
-2.72%

-0.52%

-0.23%

Aug

Sep

Oct

11.0%
3.5%
89.9%
50.4%
39.5%

5.9%
6.0%
81.2%
43.6%
37.6%

17.8%
16.8%
97.2%
57.5%
39.7%

Nov

Dec

YTD

-1.48%
3.19%

-0.80%
5.17%

-1.50%
3.90%

Nov

Dec

Ave.

Exposure
2015

NET
adjusted NET
GROSS
LONG
SHORT

Jan

8.5%
7.3%
115.0%
61.8%
53.2%

4.4%
1.8%
126.3%
65.3%
61.0%

17.7%
16.9%
90.4%
54.1%
36.3%

32.3%
32.3%
110.9%
71.6%
39.3%

May

20.9%
19.9%
99.7%
60.3%
39.4%

Jun

19.8%
16.3%
99.2%
59.5%
39.7%

Jul

9.5%
9.2%
112.2%
60.8%
51.4%

33.6%
34.1%
116.1%
74.9%
41.2%

31.4%
32.4%
117.3%
74.3%
42.9%

17.7%
16.4%
104.6%
61.2%
43.4%

Monthly Review
Market review and our actions
In December, investors turned risk-averse and pushed major Japanese stocks down while allowing mid, small caps to outperform. The Nikkei
index kicked off the month with 20,000yen, but gradually lost the ground during the month amid disappointing additional easing by the
European Central Bank, and OPEC's inability to agree on lowering crude oil production. Although the market passed well-anticipated U.S. rate
hike relatively unharmed, it got confused and disappointed by the "supplementary measures" announced by the Bank of Japan to support its
quantitative and qualitative easing policy. Reflecting risk-averse sentiment by investors, defensive sectors such as pharmaceuticals and foods
were preferred. As the Japanese yen appreciated, exporters-heavy Nikkei index underperformed TOPIX. On the other hand, in mid, small cap
segment, a number of stocks relating to Fin-tech and Min-paku (private room renting) themes rallied strongly. During the month, Nikkei fell
I 3.6%, TOPIX was down 2.1% and Jasdaq lost 1% while TSE Mothers gained 2.3%.
In this environment, same as in November, our heavy weighting on mid, small cap stocks and our stock picks bore fruit. In December alone,
Sosei group (4565) rose 64%, Nakamura Choukou (6166) was +34%, Istyle (3660) was +37% respectively and contributed to our monthly
performance. Furthermore, it was announced that an online travel booking site operator, Ikyu (2450), would be acquired by Yahoo Japan (4689),
and the stock instantly shot up 40%, which added positive return as well. On the short side, major contributors were shorts on Nikkei futures,
electronics, and electric components.

Our view on the outlook

Year 2016 got off to its worst ever beginning of the Japanese stock market, intimidated by confidence-crashing events such as severance of
diplomatic relationship between Saudi and Iran, sudden collapse of Chinese stock markets, and H-bomb testing by North Korea. The Nikkei
index dropped first 6 consecutive days in the year for the first time since 1949 when the Tokyo Stock Exchange was re-opened for trades after
WWII. Situations in the Middle East go nowhere but to exacerbate, that have caused millions of refugees flowing into the European continent
where inter-racial, inter-religious conflicts are accelerating. Quick and sharp depreciation of renminbi since early year could lead to further
weakening of emerging currencies and commodity prices, that could only deepen already serious global deflationary pressure. In the U.S. where
the FRB has begun raising interest rates, more market experts are concerned about peaking of corporate profit margins and bullish forecasts on
the stock market are becoming less common. We think that such geo-political risks and fear of stock market declines of U.S. and China would
cast a shadow on the prospect of the Japanese stock market over the coming months. In addition, Japanese yen is strengthening against major
currencies, and if this trend prevails, we are likely to see downward revisions in earnings forecasts for next fiscal year.
As various technical measures indicate that the current stock market is over-sold in the short term, a quick reversal-up could take place in any
moment, but unless above-mentioned risk factors are to be mitigated, we do not expect the market participants to become fully risk-on.
Therefore, we will shift our portfolio to a defensive mode and lower our net exposure for the time being. Having said all that, we need to keep in
mind that Japan-specific factors could boost the stock market as this is an election year (we have Upper House election in summer, and we may
possibly have a double election if PM Abe decides to dissolve the Lower House). From spring to summer, we expect to see a series of events that
could lift the market at least temporarily, including economic stimulus measures by the government, additional easing by the BOJ, and wide
range wage increase by large corporations. In sum, we view that the stock market in 2016 can be very volatile, more so than in a normal year.
Consequently, it is essential for us to make proper judgment on switching timing of market risk-on/off and to adjust our portfolio exposure
nimbly, let alone to choose winning stocks.

SUZAKU Japan Long Short Fund

December 2015
Risk Measures
Number of
VAR
Positions 95%,N=1

Long
Short
Total

65
45
110

VAR
99%,N=1

Beta

0.98
0.96
1.08%

1.66%

Historical
Volatility

12.33
9.62
6.13

Correlation
with
TOPIX

Sharpe
Ratio

0.26

0.32

BetaBeta with TOPIX 200 days, weighted average

Historical Volatilityannualized, daily volatility of 200 days returns
Correlationcalculated daily returns, since inception
Sharp Ratioannualized, daily data, since inception

Liquidity Analysis
3days 35days

Long
Short

74.3%
42.9%

0.0%
0.0%

57days

710days

10days-

0.0%
0.0%

0.0%
0.0%

0.0%
0.0%

Assumes 1/3 of 25 days average volume

Market Cap Exposure

Futures/Options/Others

Large Cap
Mid Cap
Small Cap
TOTAL

Long

Short

Net

Gross

0.0%
22.5%
28.9%
23.0%
74.3%

3.8%
24.4%
9.6%
5.2%
42.9%

-3.7%
-1.9%
19.3%
17.8%
31.4%

3.8%
46.9%
38.5%
28.2%
117.3%

Large CapJPY 200bil over)Mid CapJPY 50-200 bil)Small CapJPY 10-50 bil

Sector Exposure
Domestic Demand
Foreign Demand
leading commodities
Defensive
Futures/Options/Others

Long

Short

Net

45.5%
12.1%
8.5%
8.3%
0.0%

-16.6%
-9.0%
-7.9%
-5.7%
-3.8%

28.9%
3.1%
0.6%
2.5%
-3.7%

Top 5 Positions
LONG
Code

1
2
3
4
5

6861
2413
4587
4565
2412

SHORT
Description
KEYENCE
M3
PEPTIDREAM
SOSEI
BENEFIT ONE

Sector

Electrical
Services
Pharmacy
Pharmacy
Services

Weight

2.9%
2.5%
2.2%
2.0%
2.0%

Sector

1
2
3
4
5

Future
Electrical
Wholesale
Electrical
Retail

Weight

3.4%
1.7%
1.6%
1.6%
1.5%

Fund Information
Fund Asset
Launch Date
Domicile
Subscription
Redemption
Redemption Notice Period

USD 23 mil
2014/10/1
Cayman Islands
Monthly
Monthly
45 days

Minimum Subscription
Prime Broker
Administrator
Auditor
Legal Advisor(Cayman)
Legal Advisor(Singapore)

JPY 50 million (or USD 500,000)

Morgan Stanley
Citco
Ernst & Young
Ogier
Rajah&Tann

Village Capital Pte. Limited

6 Eu Tong Sen Street, #12-18 SOHO@The Central,SOHO1, Singapore 059817
Tel +65-6222-2059
Email rep@villagecap.com
This brochure is neither an offer to sell nor an invitation to buy interests in any fund managed or advised by us Such an offer may be extended only after an investor has
received an offering memorandum relating to the fund. This brochure does not contain all of the information needed to make an investment decision, including but not
limited to, the risks and costs of the fund. This brochure is not intended for public use or distribution. This information is subject to change without notice .