Download Click to download Firth AVF November 2013

Hereford Funds – Firth Asian Value Fund
November 2013
November 2013 Investment Review
In November 2013 the total return of the Fund after deducting all fees and expenses was 0.7%. By comparison the total return of the MSCI AC
Asia ex Japan Small Cap index was -0.9% and the total return of the MSCI AC Asia ex Japan index was 0.2%. Results for longer periods are
shown in the table below.
Asia ex Japan currencies and small cap markets were generally weaker in November. The Bank of Thailand cut its policy rate which was
unexpected and suggests credit growth, populist policies and political unrest may be taking a toll on the economy. This is not likely to help the
baht especially given the current account deficit. Inflation is less of a concern in Thailand but appears to be the main reason behind the November
rate rise by Indonesia’s central bank. The rupiah and the baht were therefore weak during November as were their respective small cap stock
markets. Small caps in the Philippines also fared poorly after the typhoon, reflecting a likely slowing of the economy following the natural disaster.
Asia ex Japan vs. USD exchange rates
Source: Bloomberg, Firth Investment Management
Asia ex Japan small cap country performance
Source: Bloomberg, Firth Investment Management
China released a policy blueprint in November following the Third Plenum which outlined further economic reform. Much depends on the detail
and implementation, but more financial sector reform is expected particularly to bank interest and deposit rates. This could lead to a more market
driven allocation of capital which would be beneficial to small and medium sized businesses and consumers. It also implies less preferential
access to capital by state owned enterprises but it is not clear whether greater reform to the SOE sector is intended. Similarly, it is too early to
expect full liberalisation of the currency but a widening of the trading band and less central bank intervention seems likely.
Changes to China’s one child policy have received a lot of publicity. However, this is unlikely to shift China’s aging demographics, or at least not
for some time, and may be intended as a more symbolic relaxation of state control. It seems unlikely that a new attitude toward political and social
reform is emerging. The Party’s renewed efforts to censor the internet and cleanse ranks after the leadership change, as well as its poor
treatment of foreign journalists investigating China’s wealthy families, suggest a desire to consolidate power within the ruling elite rather than
introduce greater accountability and transparency.
For a good account of China’s reform agenda we recommend Capital Economics “Reform package exceeds expectations” and “How will we know
if the Plenum reforms are on track”.
Several HK/China holdings performed well in November. As well as reform news from China, interim results generally showed some
improvement. This was the case whether export manufacturer/industrial or consumer related and was mainly driven by internal improvements to
cost structure and efficiency. An eventual recovery in revenues, combined with better operating leverage, should prompt a further rerating of
those companies that have adapted to the higher cost, lower growth environment.
There were few changes to the portfolio during November. We trimmed our position in Gome given the strong price performance. Likewise
Straco, a Singapore listed and managed but China based leisure business, posted excellent results and we reduced our target weight due to the
rising valuation risk. We’ve taken an initial position in a Singapore electronic manufacturing services company which should benefit from a cyclical
recovery and continue to pay a good dividend in the meantime.
Key Information Hereford Funds – Firth Asian Value Fund
NAV A Shares (29/11/13):
Total Fund Size:
Strategy Assets:
Fund Launch Date:
$112.35
$67 million
$184 million (a)
31/05/11
Performance (%) (net of fees and expenses)
Jan
Feb
Mar
HFFAVF1
2
Small Cap
Asia ex Japan
HFFAVF1
3
2
Small Cap
Asia ex Japan
3
HFFAVF1
Small Cap2
Asia ex Japan3
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2011
-
-1.2
-2.4
-2.3
0.6
2.8
1.1
-8.5
-11.4
-9.9
-12.6
-16.3
-13.2
6.4
10.1
12.0
-5.9
-8.7
-8.3
0.8
-1.2
0.6
-19.7
-26.1
-20.2
-
-
-
-
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2012
6.1
10.0
10.8
12.1
9.0
6.0
-1.4
-3.8
-3.1
-0.9
-1.7
0.0
-5.9
-7.8
-9.6
0.9
1.8
3.0
3.9
0.0
2.6
4.2
2.2
-0.5
3.1
6.7
7.0
2.2
-1.1
-0.3
-0.2
2.9
2.8
3.3
3.5
3.1
29.6
22.4
22.4
Jan
Feb
Mar*
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2013
3.8
3.5
1.7
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
-1.9
-2.5
-1.5
2.9
6.2
5.4
1.0
2.7
4.4
0.7
-0.9
0.2
Since Launch
HFFAVF1
Small Cap2
Asia ex Japan
8.0
6.7
4.2
12.4
-3.5
1.8
3
Source: Bloomberg, Firth Investment Management
* Month end date used is March 28, 2013.
1. Hereford Funds – Firth Asian Value Fund 2. MSCI AC Asia ex Japan Small Cap USD Net Index 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
43
0
3
11
3
0
11
11
1
4
13
Sectoral breakdown
Consumer Discretionary
Consumer Staples
Financials
Health Care
Industrials
Information Technology
Materials
Others
Cash
% of assets
48
8
3
0
11
10
3
4
13
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%
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.