Hereford Funds – Firth Asian Value Fund
December 2012
December 2012 Investment Review
In December 2012 the Fund’s net asset value rose by 3.3% (after deducting all fees and expenses). By comparison the MSCI AC Asia ex Japan
Small Cap index rose by 3.5% and the MSCI AC Asia ex Japan index rose by 3.1%.
Year to date to the end of December 2012 the Fund’s net asset value rose by 29.6% (after deducting all fees and expenses). By comparison the
MSCI AC Asia ex Japan Small Cap index rose by 22.4% and the MSCI AC Asia ex Japan index rose by 22.4%.
Several HK/China manufacturing cyclicals and consumer holdings performed well in December. No new stocks were added to the portfolio
although due diligence work was done on a number of companies. We reviewed several holdings, which resulted in a few adjustments to target
weights due to rising valuation risk. We’ve reduced the target weight of Pepsi Philippines (to 1% from 2%) and Allianz Malaysia (to 2% from 3%)
after some very good performance over 2012.
We exited our position in Aeon Credit Services Asia (ACSA). The Aeon group’s restructuring of its financial arm helped provide an opportunity.
ACSA is one of the original holdings in the Fund, which we continued to own due to its loyalty/credit card arrangement with Aeon Stores Hong
Kong. However, providing consumer financing services to Aeon Stores’ growing customer base in China seems more difficult than retail mainly for
regulatory reasons. Meanwhile, Hong Kong’s banks continue to encroach on ACSA’s niche and it may convert into a fully licensed bank to
compete head on.
We added City Telecom to our watch list in December. The company has sold its Hong Kong telecom and broadband businesses to raise
substantial cash. It plans to become a media company (production of dramas, etc.) and take share from TVB, which dominates Hong Kong’s free
to air (FTA) TV market and associated advertising. However, new FTA TV licenses have been delayed for some time and a period of losses
seems likely once the new business starts. Therefore, we felt the idea premature despite management’s history of past success. City Telecom
came to our attention from a combination of deep value and corporate action screens. Typically, we focus on those ideas where signals from
different sources reinforce one another.
Key Information Hereford Funds – Firth Asian Value Fund
NAV A Shares (31/12/12):
Total Fund Size:
Strategy Assets:
Fund Launch Date:
$104.06
$18.4 million
$74 million (a)
31/05/11
Performance (%) (net of fees and expenses)
Hereford Funds - Firth Asian Value Fund
Jan
12
Feb
12
Mar
12
Apr
12
May
12
Jun
12
Jul
12
Aug
12
Sep
12
Oct
12
Nov
12
Dec
12
2012
YTD
6.1
12.1
-1.4
-0.9
-5.9
0.9
3.9
4.2
3.1
2.2
-0.2
3.3
29.6
MSCI AC Asia ex Japan Small Cap USD Net
10.0
9.0
-3.8
-1.7
-7.8
1.8
0.0
2.2
6.7
-1.1
2.9
3.5
22.4
MSCI AC Asia ex Japan USD Net
10.8
6.0
-3.1
0.0
-9.6
3.0
2.6
-0.5
7.0
-0.3
2.8
3.1
22.4
2011*
Since
Launch
-19.7
4.1
MSCI AC Asia ex Japan Small Cap USD Net
-26.1
-9.5
MSCI AC Asia ex Japan USD Net
-20.2
-2.3
Hereford Funds - Firth Asian Value Fund
*June-December
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
Cash
% of assets
40
4
10
8
2
9
12
1
15
Sectoral breakdown
Consumer Discretionary
Consumer Staples
Financials
Health Care
Industrials
Information Technology
Materials
Cash
% of assets
53
8
2
1
12
6
3
15
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.