Hereford Funds – Firth Asian Value Fund April 2013 April 2013 Investment Review In April 2013 the Fund’s net asset value rose by 1.0% (after deducting all fees and expenses). By comparison the MSCI AC Asia ex Japan Small Cap index rose by 2.6% and the MSCI AC Asia ex Japan index rose by 1.8%. Most of the Hong Kong/China part of the portfolio underperformed in April during a month of bad news. Fitch cut China’s long term local currency credit rating from AA- to A+. Moody’s affirmed its rating for China but lowered the outlook from positive to stable. The IMF cut its global economic outlook and warned over China’s local government debt. Poor 2012 results for many HK/China companies reported in the last week of March affected share prices in April. None of the underlying cyclical or structural issues are necessarily new and we added to several of our HK/China positions on share price weakness. India was the best performing small cap market in April. As yet we have no exposure here although we have been doing due diligence on some companies. Malaysia, in what was perhaps a pre-election run up, was the second best performing small cap market in Asia. Korea and Taiwan small caps also did well especially in contrast to most Southeast Asian markets which showed some relative weakness in April. Our holding in Shinsegae, a Korean department store operator, was sold completely during April. We had originally started buying in early 2012 following the demerger of its hypermarket business. Our view at that time was that the price did not take into account the potential from a more focussed department store business and the opportunity to tidy up its balance sheet by selling non-core assets such as a valuable stake in Samsung Life. It turned out that we were over-optimistic. In fact the company increased borrowing to levels that we consider imprudent. Shinsegae has form as regards excessive leverage and we should have known better. In 1998 it flirted with bankruptcy and was forced to sell its warehouse membership stores to Costco in order to reduce debt. We trimmed positions in Roadshow (bus advertising) and Samson (furniture) in Hong Kong, and in two Indonesian retailers, Matahari Putra and Ramayana Lestari, as well as in Ottogi a South Korean maker of sauces and seasonings. This follows some continued good performance from these stocks. We established two new positions in April, a South Korean education company and a HK/China spa/cosmetics company. Key Information Hereford Funds – Firth Asian Value Fund NAV A Shares (30/04/13): Total Fund Size: Strategy Assets: Fund Launch Date: $113.42 $49 million $156 million (a) 31/05/11 Performance (%) (net of fees and expenses) Jan Feb Mar HFFAVF1 Small Cap2 Asia ex Japan HFFAVF1 2 Small Cap Asia ex Japan HFFAVF1 3 3 2 Small Cap Asia ex Japan3 - - - Apr May Jun Jul - - -1.2 -2.4 -2.3 Jan Feb Mar* Apr May Jun Jul 1.9 1.6 -0.1 2.0 0.5 -2.2 1.0 2.6 1.8 HFFAVF1 Small Cap2 Asia ex Japan3 Nov 2.2 -1.1 -0.3 Jul 3.8 3.5 1.7 Oct 3.1 6.7 7.0 Jun 0.9 1.8 3.0 Nov 4.2 2.2 -0.5 May -5.9 -7.8 -9.6 Oct 3.9 0.0 2.6 Apr -0.9 -1.7 0.0 Nov 6.4 10.1 12.0 Mar -1.4 -3.8 -3.1 Oct -12.6 -16.3 -13.2 Feb 12.1 9.0 6.0 Sep -8.5 -11.4 -9.9 Jan 6.1 10.0 10.8 Aug 0.6 2.8 1.1 Source: Bloomberg, Firth Investment Management 1. Hereford Funds – Firth Asian Value Fund 2. MSCI AC Asia ex Japan Small Cap USD Net Index *Month end date used is March 28, 2013 as the last working day of the month due to Good Friday. Aug Aug Sep Sep -5.9 -8.7 -8.3 -0.2 2.9 2.8 Dec 0.8 -1.2 0.6 2011 -19.7 -26.1 -20.2 Dec 2012 Dec 2013 3.3 3.5 3.1 29.6 22.4 22.4 9.0 8.6 1.3 Since Launch 13.4 -1.7 -1.1 3. MSCI AC Asia ex Japan USD Net Index (large and mid cap) Source: Bloomberg, Firth Investment Management *Both MSCI benchmark indices (Bloomberg: MSLUAAJN and NDUECAXJ) are net total return indices in USD. MSCI calculates net total return by reinvesting any dividend income after deducting withholding taxes. Country breakdown Hong Kong/China Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand Others Cash % of assets 42 5 9 6 1 9 13 1 4 10 Sectoral breakdown Consumer Discretionary Consumer Staples Financials Health Care Industrials Information Technology Materials Others Cash % of assets 54 8 3 1 10 7 3 4 10 Investment Objective Hereford Funds - Firth Asian Value Fund is to generate long term capital growth from a portfolio of listed company securities in Asia (ex-Japan). The Compartment will follow a value-based investing approach and will have a bias towards smaller capitalisation stocks. The Compartment will directly invest primarily in shares of companies located in, incorporated in, headquartered in, listed on exchanges in or with significant operations in or significant income derived from Hong Kong, India, Indonesia, Korea, Malaysia, the Philippines, the PRC, Singapore, Taiwan and Thailand. The Compartment may also directly invest in smaller or developing economies in Asia such as Bangladesh, Cambodia, Laos, Pakistan, Sri Lanka or Vietnam. The Compartment will not invest in China A Shares when investing in the PRC. The Compartment will directly invest actively in a diversified portfolio of listed equity securities. The Compartment will generally only invest in securities admitted to official listing on a recognized stock exchange, or dealt in on another regulated market. Although the Compartment intends to invest in a portfolio of not less than 40 stocks and not more than 100 stocks, it is not restricted in or subject to any material concentration or diversification restrictions, and may hold a more limited number of investment positions. The Compartment will typically be near fully invested but may hold liquid assets on an ancillary basis. Under normal market conditions, investment in liquid assets and debt instruments of any kind will not exceed 15% of the Compartment's net assets. In exceptional market circumstances and on a temporary basis only, this limit may be increased to 100% with due regard to the principle of risk spreading. The Investment Manager intends to meet the Fund’s objective primarily through stock selection and country allocation based upon the investment advice of the Investment Adviser. Typically stocks will be bought and held. This is not a trading strategy and it is not intended to attempt to time general market movements. While portfolio returns will be measured against the Benchmark Index, portfolio management will not be constrained by reference to the index. Fund Codes Bloomberg ISIN Reuters Sedol Valoren WKN HFIRASA LX * LU0618975774 NA B64KS81 12853411 A1H9V4 * Share Class A Fund Details Dealing Day Dividends Investment Manager Investment Advisor Promoter Fund Administrator Custodian Legal Advisers Auditor Daily None - income accumulated within the fund Swiss-Asia Financial Services Pte. Ltd. 8 Temasek Blvd, #43-01 Suntec City Tower 3, Singapore Firth Investment Management Pte. Ltd. 180 Cecil Street, #13-03 Bangkok Bank Building, Singapore VP Bank (Luxembourg) S.A., 26 Avenue de la Liberté, L-1930 Luxembourg VPB Finance S.A., 26 Avenue de la Liberté, L-1930 Luxembourg VP Bank (Luxembourg) S.A., 26 Avenue de la Liberté, L-1930 Luxembourg Elvinger, Hoss & Prussen, 2 Place Winston Churchill, L-1340 Luxembourg Deloitte, 560 Rue de Neudorf, L-2220 Luxembourg Annual Management Charge Share Class A Share Class D (b) 1.5% 2.0% Annual Management Charge Performance fee: High water mark?: Hurdle rate: 10% Yes MSCI AC Asia ex Japan Small Cap USD Net Minimum Investment Share Class A (b) Share Class D $100,000 initial / $10,000 subsequent $10,000 initial / $1,000 subsequent Order Transmission Information Original Applications To: VPB Finance S.A. attn. Fund Operations / TA-HFF P.O. Box 923 L-2019 Luxembourg or, for transmissions via courier service, 26, avenue de la Liberté, L-1930 Luxembourg Subsequent Applications Only Via Facsimile: VPB Finance S.A. attn. Fund Operations / TA-HFF Fax: (+352) 404 770 283 Tel: (+352) 404 770 260 e-mail: [email protected] (a) This refers to the total assets to which the Investment Adviser applies the reference strategy. (b) Share Class A: these shares have UK reporting since launch and are registered with the BaFin for public distribution in Germany from 17/10/12. Germany – Paying Agent as defined by German Regulation: Marcard, Stein & Co – Ballindamm 36, 20095 Hamburg; Phone: +49/40.32.099.556, Fax: +49/40.32.099.206 (c) Share Class D: these shares have not yet been launched. This document is for information purposes and internal use only. It is neither an advice nor a recommendation to enter into any investment. Investment suitability must be determined individually for each investor, and the financial instruments described above may not be suitable for all investors. This information does not provide any accounting, legal, regulatory or tax advice. Please consult your own professional advisers in order to evaluate and judge the matters referred to herein. An investment should be made only on the basis of the prospectus, the annual and any subsequent semi-annual-reports of HEREFORD FUNDS (the "Fund"), a société d'investissement à capital variable, established in Luxembourg and registered under Part I of Luxembourg law of 20 December, approved by the Commission de Surveillance du Secteur Financier (CSSF). These can be obtained from [the Fund, 26, avenue de la Liberté, L-1930 Luxembourg or from VPB Finance S.A., 26, avenue de la Liberté, L-1930 Luxembourg and any distributor or intermediary appointed by the Fund]. No warranty is given, in whole or in part, regarding performance of the Fund. There is no guarantee that its investment objectives will be achieved. Potential investors shall be aware that the value of investments can fall as well as rise and that they may not get back the full amount invested. Past performance is no guide to future performance. The information provided in this document may be subject to change without any warning or prior notice and should be read in conjunction with the most recent publication of the prospectus of the Fund. Whilst great care is taken to ensure that information contained herein is accurate, no responsibility can be accepted for any errors, mistakes or omission or for future returns. This document is intended for the use of the addressee or recipient only and may not be reproduced, redistributed, passed on or published, in whole or in part, for any purpose, without the prior written consent of HEREFORD FUNDS. Neither the CSSF nor any other regulator has approved this document.
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