Click to download Firth AVF August 2013

Hereford Funds – Firth Asian Value Fund
August 2013
August 2013 Investment Review
In August 2013 the total return of the Fund after deducting all fees and expenses was -1.9%. By comparison the total return of the MSCI AC Asia
ex Japan Small Cap index was -2.5% and the total return of the MSCI AC Asia ex Japan index was -1.5%.
The month was marked by weak performances across currencies and stock markets in Southeast Asia and India. Currencies in both India and
Indonesia fell by 9% against the US dollar. In response, Indonesia raised policy interest rates and India took further measures to protect its
currency.
There were no significant changes to the portfolio during the month. Aside from some poor performances amongst our limited SE Asian and
interest rate-sensitive exposure, other portfolio holdings moved with end June results announcements. Generalising somewhat, the message from
companies remains the same as it has been in the last couple of quarters: revenue growth is difficult to achieve and cost pressures persist.
Separately, we have three holdings which have some exposure to cash flows and net assets denominated in Australian dollars, a currency which
has weakened against both the Singapore and Hong Kong dollars so far this year.
In recent weeks the financial media has been replete with comment on structural economic problems in Indonesia and India. Their weaknesses
have long been known, but perhaps the bull market has been an obstacle to discussion and resolution. We can add our own anecdotes too. In
recent days a custodian bank notified us that they had experienced difficulties pricing sales of Indonesian currency for US dollars. This is an
illustration of the risks arising from the country’s (and region’s) acute and persistent dependence on US dollar capital flows.
In India, we have applied for a foreign institutional investor licence to enable one of our accounts to invest directly in Indian stocks. The
application process was started more than six months ago and we expect it to take another six months. Opening brokerage accounts can take
another couple of months in addition. Such red tape and bureaucratic delay is hard to understand in the context of India’s apparent need for
outside capital.
Two years ago 17% of the portfolio was exposed to the developing SE Asian markets (Indonesia, Malaysia, Philippines and Thailand).
Maintaining our value discipline and preference for sound balance sheet structures has resulted in that exposure falling to 7% in the intervening
period. Similarly, as a firm we have been able to invest in India since early 2012 but until very recently we were unable to find companies that met
our criteria. Of course, our approach also meant that we missed some of the very strong returns from SE Asian stocks. But going forward we are
alert to the opportunities created by market weakness and macro-economic change. Both Indonesia and India will have general elections in 2014,
providing at least the opportunity for a change in direction.
Key Information Hereford Funds – Firth Asian Value Fund
NAV A Shares (30/08/13):
Total Fund Size:
Strategy Assets:
Fund Launch Date:
$107.35
$59 million
$168 million (a)
31/05/11
Performance (%) (net of fees and expenses)
Jan
Feb
Mar
HFFAVF1
2
Small Cap
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
0.4
1.2
-1.3
-4.8
-8.7
-5.7
0.9
0.8
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.
Aug
Aug
-1.9
-2.5
-1.5
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
3.2
-1.3
-5.5
Since Launch
7.3
-10.7
-7.6
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
India
Korea
Malaysia
Philippines
Singapore
Taiwan
Thailand
Others
Cash
% of assets
40
1
1
8
4
1
10
11
1
5
19
Sectoral breakdown
Consumer Discretionary
Consumer Staples
Financials
Health Care
Industrials
Information Technology
Materials
Others
Cash
% of assets
45
8
3
0
9
7
3
5
19
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. 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
Promoter
Fund Administrator
Custodian
Legal Advisers
Auditor
Daily
None - income accumulated within the fund
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%
Minimum Investment
Share Class A (b)
Share Class D
Annual Management Charge
Performance fee:
High water mark?:
Hurdle rate:
10%
Yes
MSCI AC Asia ex Japan Small Cap USD Net
$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.