ASIA HOUSE FUNDS
SEMI-ANNUAL REPORT
JUNE 30, 1996
INVETSMENT ADVISOR:
Asia House Investments, Inc.
Shand Morahan Plaza, Suite 307-B
1007 Church Street
Evanston, IL 60201
(847) 733-2200
PRESIDENT'S REPORT
FOR THE FIRST HALF OF 1996 JULY 23, 1996
We are pleased to report that despite the first half of 1996 continuing in a
lackluster mode for most Asian markets, both Asia House funds had positive
returns. PATIENCE WITH THE "VALUE+ GROWTH" METHOD HAS FINALLY BEGUN TO BE
REWARDED with several stocks in our portfolios finally being "discovered" and
subsequently doubling in value. One Korean holding more than tripled in the
first half alone, thus proving that patience can be rewarding.
These factors helped the ASEAN Growth Fund achieve an NAV per share of $9.20 as
of June 30, 1996 versus $8.47 at year-end, an 8.62% return (despite the Fund
being more than 50% in cash during this period) DUE TO GOOD PERFORMANCE BY MANY
STOCKS IN THE PORTFOLIO. This places the fund in the top 25% of Morningstar's
Pacific Region category (includes all kinds of Asia funds, i.e. Japan funds,
etc..) for the first half of 1996. Combining all of the distributions makes the
total return since inception close to break-even. As of July 23, 1996, the NAV
per share is $9.12.
As of June 30, 1996, the Far East Growth Fund's NAV per share increased to $9.42
from $8.88 at the end of 1995, representing a 6.08% increase. This is also
despite a fairly heavy cash position during the period. ACCORDING TO
MORNINGSTAR, THE FAR EAST GROWTH FUND IS #10 OF 24 ALL-ASIA FUNDS SINCE ITS
INCEPTION (1/30/94-6/28/96) and is in the top 50% of the Pacific Region category
in the first half of 1996. As of July 23, 1996, the NAV per share has risen even
further to $9.55, despite falling markets.
Market Overviews
- ----------------
JAPAN
- -----
The Japanese stock market recovered in Yen terms , but because the Yen has been
so weak, the US$ return has been minimal. The Far East Growth Fund reduced its
weightings in Japanese stocks during this period and only retains stocks which
we feel are the most underpriced. We do not expect significant gains in the
Japanese market for the rest of the year unless the Yen weakens further. Much of
last year's earnings growth came from semiconductors and other industrial
commodities, which will not likely be repeated this year.
KOREA
- -----
Despite the increase in the foreign investment limit from 15% to 18% on April
1st, Korea had a disappointing first half, declining approximately 6% in local
currency terms, and even more so in US$ terms as its currency, the Won, has
weakened by more than 5%. Korea is suffering from the new found competitiveness
of Japanese companies resulting from the weak Yen. This is most clearly shown in
DRAM semiconductor prices which have fallen due to the lower cost of Japanese
production. For this reason the Fund sold LG ELECTRONICS as its earnings for
1996 were significantly threatened by such. Several other Korean stocks were
sold by the Fund in the first quarter due to disappointing 1995 earnings and
only the stocks which we believe hold the
greatest value were retained. The Korean Government announced that the foreign
investment limit will be raised in the near future, which should provide some
support for the market, but first half earnings announcements, due in August,
will be critical to performance for the rest of the year.
ASEAN
- -----
ASEAN markets are, on average, about where they began the year. Singapore's
stock market has retraced nearly all of its early gains, due greatly to the
Government's newly announced measures to slow down property price increases.
Fortunately, the ASEAN Growth Fund sold its property stocks before this
occurred. One item that bears mentioning is that Singapore Telecom, which
represents nearly 20% of the market's capitalization, has performed extremely
well this year despite its p/e ratio being nearly 40 times for estimated profit
growth in the low teens for the next few years. Without this, Singapore's stock
index would be much below its current levels.
The Indonesian market has performed quite well, especially the finance sector.
Indonesia Telekom, similarly to Singapore Telecom, has also been an outstanding
performer, representing 18% of market capitalization. Its share price has risen
45% this year despite its high p/e ratio. Fortunately, our two major holdings,
ANWAR SIERAD and BERLIAN LAJU TANKER, both more than doubled in share price
during this period. The former was completely sold by both funds while the
latter was retained. One area of concern may be on the political side, as
President Suharto has had recent health problems and as the opposition to his
re-election in 1997 increases.
Thailand has underperformed due to weak company earnings and concern about its
increasing trade deficit. Malaysia also has a trade deficit problem,
particularly in the current account portion, but its stock market has performed
quite well. The p/e ratios for these markets are still a bit too high, but there
remain several cheap stocks in each market. Furthermore, Thai investors are
finally waking up to the value in smaller "value+growth" stocks, which has been
a great blessing, as Asia House has patiently held on to many of these stocks
since 1994. For instance, Crown Seal-Thailand, a massively underpriced stock in
our view, has finally started performing, while insurance stocks in Thailand
have also rebounded.
GREATER CHINA
- -------------
As for Hong Kong, we continue to believe that exposure to this area is very
risky. There is now only one year before Hong Kong reverts to communist control
and we believe many problems will arise in the colony. The Chinese are trying to
be a bit more cooperative, but it is not in the Chinese Communist nature to
leave things alone. Relations between the U.S. and China are stable but
tentative, as many in Washington are warming to Taiwan and Vietnam as
counterweights to what they see as an increasingly aggressive and dangerous
China. In March, Taiwan's stock market was shaken by Chinese military maneuvers
in the South China Sea. While no attack took place, missiles did fly over Taiwan
and confidence remains fairly low over future relations. Taiwan is still irking
China by pushing for participation in international groups such as the IMF, the
World Bank etc.. while also boosting its defense with the purchase of F-16s and
Patriot missiles. Although Taiwan's stock market has recovered from its lows, we
continue to be cautious, particularly due to the country's heavy reliance on
semiconductor production, which we believe is entering very difficult
circumstances.
STOCK UPDATES
CROWN SEAL - THAILAND
- ---------------------
The stock of this beverage packaging producer rose 25% in the period and yet
still sells on ONLY 6.8 TIMES BROKERS' 1996 ESTIMATED EARNINGS. RETURN ON EQUITY
IS ABOVE 20% AND THE PRICE TO 1996 ESTIMATED BOOK VALUE IS ONLY 1.35. Beverage
production is still booming in Thailand as several new beer companies are
starting production, much of which will be exported to neighboring Indochinese
countries.
ACOM - JAPAN
- ------------
This consumer finance company can borrow at less than 4% and lend to individuals
(often through ATM machines) at over 25%. Even during the recession, consumer
loan growth remained very good and yet the default rate was very low. An
improving economy should only improve conditions for ACOM. Large banks have
traditionally ignored this business as their primary interest is in lending to
industry and, unfortunately, real estate. This stock has performed very well
versus the market since it was purchased. Recurring profits were up 40% last
year and have exceeded 20% per annum for the past three years. We believe
earnings growth will continue at double digit rates, yet the stock sells at 16
times this year's recurring earnings estimates- thus remaining a great bargain
for a Japanese stock.
HUA THAI- THAILAND
- ------------------
This garment producer, which has significant operations in Vietnam, had a
problem with its new Laotian dying factory in late 1995 and early 1996 and
earnings have been revised down to only 14% growth in 1996 (after 57% in 1995).
It now sells on less than 4 times 1996 broker's estimated earnings and yields
9%, so the stock remains a great value in Asia House's view.
PACIFIC INSURANCE AND AYUDHYA INSURANCE- THAILAND
- -------------------------------------------------
These two insurance companies sell on less than 8 times and 7 times 1996
estimated EPS, respectively. Although new insurance licenses are planned,
foreign companies are now allowed to buy 100% of existing insurers. This latter
deregulation led to good performance for many insurance stocks. Nearly half of
these companies' earnings come from stable interest income on their massive cash
hoards. Ayudhya Insurance also owns equities in affiliated companies at very low
cost bases which, if revalued, places the company at 0.7 times book value.
DAESUNG CONSOLIDATED- KOREA
- ---------------------------
This former coal mining company was attractive because of its associated
companies in the industrial and city gas businesses. On a consolidated basis,
the company sold at less than 0.2 times estimated book value. The stock
performed poorly through 1995 and through the first quarter of 1996, then
investors started to realize the value in this stock when it was announced that
the company's extensive land holdings in the mountains were to be redeveloped
into a resort. The price quintupled before we recently sold it.
CONCLUSION
The "value + growth" style of investing sometimes require a great deal of
patience. Brokers often tire of hearing talk about value, but eventually cheap
stocks are discovered and good profits are made. The US stock market has been
tough to compete against and if it slows down, there is a good chance that
assets will be switched to non-Japanese Asian markets as: 1) valuations in most
markets have returned to more reasonable levels; 2) stock index performances
relative to the Dow Jones Industrials have also returned to levels prior to the
emerging markets excesses of 1993; and 3) economic growth remains strong
throughout the region with even Japan now clearly moving out of recession.
Thus, while we remain somewhat cautious on most Asian markets for valuation
considerations, there remain inexpensive stocks in each market, which we shall
endeavor to discover and too add to the equities we retain in the portfolios,
which we still believe to be of great value. We expect to be much more fully
invested in the third quarter now that prices have come down and look forward to
your continued support.
Sincerely yours,
/s/ John F. Vail
- -------------------------
John F. Vail
President, Asia House Investments Inc.
<TABLE>
<CAPTION>
ASIA HOUSE FUNDS - FAR EAST GROWTH FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
PAR/SHARE PERCENT OF
DESCRIPTION AMOUNT MARKET VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS AND EQUIVALENTS
INDONESIA
Pt Berlian Laju Tanker (Foreign) ............................60,000 $ 41,246 2.4%
---------------------
JAPAN
Acom Company Ltd..............................................2,000 78,248
Denyo Co Ltd..................................................4,000 55,449
Okinawa Electric Power..........................................808 20,412
---------------------
154,109 8.9%
---------------------
KOREA
Chosun Brewery Company .........................................792 22,553
Daedong Industrial............................................3,000 38,092
Daesung Construction Coal Mines.................................500 37,907
Global Enterprise Preferred Stock *...........................2,600 64,103
Korea Cast Iron Pipe Industry...................................800 41,420
Korea Reinsurance Rights *......................................339 3,970
Korea Reinsurance.............................................1,456 62,103
Sam Yang Co. Ltd Preferred Stock .................................8 112
Shinyoung Securities Company Preferred Stock..................2,675 26,677
---------------------
296,937 17.2%
---------------------
THAILAND
Crown Seal Co. Ltd (Local)....................................8,200 23,567
Crown Seal Co. Ltd (Foreign).................................46,300 136,713
Hua Thai Manufacturing Ltd (Foreign)..........................8,000 26,772
---------------------
187,052 10.8%
-------------------------------------
TOTAL STOCKS AND EQUIVALENTS (Cost $724,362) 679,344 39.3%
-------------------------------------
CORPORATE CONVERTIBLE DEBT
THAILAND
Union Asia Finance Public Company ..... 3.375% 12/22/03 $ 75,000 45,563 2.6%
-------------------------------------
TOTAL CORPORATE CONVERTIBLE DEBT (Cost $55,658) 45,563 2.6%
-------------------------------------
SHORT-TERM INVESTMENTS
UNITED STATES
Prudential-Bache Repurchase Agreement, dated 6/28/96, due 07/01/96, with a
maturity value of $911,145 and an effective yield of 4.77%, collateralized
by a U.S. Government Agency Security with a rate of 9% and a maturity date
of 9/01/22,
with an aggregate market value of $929,001, at cost $910,783 910,783 52.7%
-------------------------------------
TOTAL INVESTMENTS (Cost $1,690,803)** 1,635,690 94.6%
Excess of Other Assets over Liabilities 92,916 5.4%
-------------------------------------
NET ASSETS $ 1,728,606 100.0%
=====================================
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
** The aggregate identified cost for federal income tax
purposes is $1,690,803 resulting in gross unrealized
appreciation and depreciation of $92,963 and $148,076,
respectively, and net unrealized depreciation of $55,113.
</TABLE>
See accompanying Notes to the financial statements. 1
ASIA HOUSE FUNDS - FAR EAST GROWTH FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 - CONTINUED
(UNAUDITED)
- -------------------------------------------------------------------------------
At June 30, 1996, industry sector diversification of the
Fund's Portfolio of Investments, excluding short-term
investments, was as follows:
PERCENTAGE OF
INDUSTRY SECTOR NET ASSETS
Packaging 9.2%
Financial Services 8.7
Transportation 6.1
Machinery 5.4
Insurance 3.8
Metals and Mining 2.4
Diversified 2.2
Textiles 1.6
Food and Beverage 1.3
Utilities 1.2
-------------------
41.9%
===================
2 See accompanying Notes to the financial statements.
<TABLE>
<CAPTION>
ASIA HOUSE FUNDS - ASEAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
PAR/SHARE PERCENT OF
DESCRIPTION AMOUNT MARKET VALUE NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STOCKS AND EQUIVALENTS
INDONESIA
Pt Argha Karya Prima Industry (Foreign)................................400 $ 546
Pt Berlian Laju Tanker (Foreign) ...................................35,000 24,060
---------------------
24,606 2.6%
---------------------
SINGAPORE
Straits Steamship Warrants *.........................................2,750 4,189 0.4%
---------------------
THAILAND
Ayudhya Insurance Co. Ltd............................................4,000 29,921
Crown Seal Co. Ltd (Local)..........................................10,000 28,740
Crown Seal Co. Ltd (Foreign)........................................20,000 59,055
Hua Thai Manufacturing Ltd (Foreign)................................11,500 38,484
International Cosmetics (Foreign)....................................3,600 27,921
Pacific Insurance Co. Ltd............................................7,000 18,465
---------------------
202,586 21.5%
-------------------------------------
TOTAL STOCKS AND EQUIVALENTS (Cost $235,617) 231,381 24.5%
-------------------------------------
CORPORATE CONVERTIBLE DEBT
THAILAND
Tanayong Public Company.............3.500% 03/01/04 $ 100,000 76,500
Union Asia Finance Public Company ..3.375% 12/22/03 75,000 45,563
---------------------
122,063 12.9%
-------------------------------------
TOTAL CORPORATE CONVERTIBLE DEBT (Cost $125,157) 122,063 12.9%
-------------------------------------
SHORT-TERM INVESTMENTS
UNITED STATES
Prudential-Bache Repurchase Agreement, dated 6/28/96, due 07/01/96, with a
maturity value of $582,308 and an effective yield of 4.77%, collateralized
by a U.S. Government Agency Security with a rate of 9%, a maturity date of
9/01/22,
and an aggregate market value of $593,720, at cost $ 582,077 582,077 61.5%
-------------------------------------
TOTAL INVESTMENTS (Cost $942,851)** 935,521 98.9%
Excess of Other Assets over Liabilities 10,633 1.1%
-------------------------------------
NET ASSETS $ 946,154 100.0%
=====================================
NOTES TO THE PORTFOLIO OF INVESTMENTS:
* Non-income producing security.
* * The aggregate identified cost for federal income tax
purposes is $942,851 resulting in gross unrealized
appreciation and depreciation of $33,701 and $41,031,
respectively, and net unrealized depreciation of $7,330.
</TABLE>
See accompanying Notes to the financial statements. 3
ASIA HOUSE FUNDS - ASEAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 - CONTINUED
(UNAUDITED)
- ------------------------------------------------------------------------------
At June 30, 1996, industry sector diversification of the
Fund's Portfolio of Investments, excluding short-term
investments, was as follows:
PERCENTAGE OF
INDUSTRY SECTOR NET ASSETS
Packaging 9.4%
Real Estate 8.1
Insurance 5.1
Financial Services 4.8
Textiles 4.1
Chemicals 3.0
Transportation 2.5
Diversified 0.4
===================
37.4%
===================
4 See accompanying Notes to the financial statements.
ASIA HOUSE FUNDS
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES - JUNE 30, 1996 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
FAR EAST ASEAN
GROWTH GROWTH
FUND FUND
------------------- --------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1) $ 1,635,690 $ 935,521
Foreign currency, at value (Note 1) 79,631 -
Receivable from Investment Adviser (Note 2) 766 816
Deferred organization expenses (Note 1) 10,691 10,691
Prepaid insurance 6,004 3,590
Dividends and interest receivable 4,126 4,740
------------------- --------------------
Total assets 1,736,908 955,358
------------------- --------------------
LIABILITIES:
Accrued expenses and other liabilities 8,302 9,204
------------------- --------------------
Total liabilities 8,302 9,204
------------------- --------------------
NET ASSETS $ 1,728,606 $ 946,154
=================== ====================
Net asset value per share based upon respective
capital stock shares outstanding $ 9.42 $ 9.20
=================== ====================
NET ASSETS CONSIST OF:
Paid-in capital $ 1,855,194 $ 1,048,121
Accumulated undistributed net investment income 51,215 16,000
Accumulated net realized loss on investments (119,222) (110,620)
Net unrealized depreciation on investments
and foreign currency denominated assets and liabilities (58,581) (7,347)
------------------- --------------------
NET ASSETS $ 1,728,606 $ 946,154
=================== ====================
Cost basis of investments $ 1,690,803 $ 942,851
=================== ====================
Cost basis of foreign currency $ 83,058 $ -
=================== ====================
Capital stock shares outstanding 183,534 102,848
=================== ====================
</TABLE>
See accompanying Notes to the financial statements. 5
ASIA HOUSE FUNDS
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------------
FAR EAST ASEAN
GROWTH GROWTH
FUND FUND
---------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign tax expense of $2,950 and $1,248,
respectively) (Note 1) $ 19,845 $ 11,231
Interest 19,592 16,660
---------------- ----------------
Total income 39,437 27,891
---------------- ----------------
EXPENSES:
Custodian, administrative and transfer agent fees 59,861 60,610
Management fee (Note 2) 10,174 5,917
Auditing fees 3,762 4,845
Insurance 4,205 2,677
Legal fees 4,721 2,936
Amortization of organization expenses (Note 1) 2,073 2,073
Miscellaneous 1,436 1,054
---------------- ----------------
Total expenses 86,232 80,112
Less: Fees waived and expenses reimbursed
by the Adviser (Note 2) (66,255) (68,492)
---------------- ----------------
Net expenses 19,977 11,620
---------------- ----------------
Net investment income 19,460 16,271
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY RELATED TRANSACTIONS:
Net realized gain (loss) on:
Investments 11,275 (22,763)
Foreign currency related transactions (4,106) (2,685)
---------------- ----------------
Net realized gain (loss) on investments and foreign currency
related transactions 7,169 (25,448)
Change in net unrealized appreciation (depreciation) on investments
and foreign currency denominated assets and liabilities 73,993 92,340
---------------- ----------------
Net realized and unrealized gain on investments and
foreign currency related transactions 81,162 66,892
---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 100,622 $ 83,163
================ ================
</TABLE>
6 See accompanying Notes to the financial statements.
ASIA HOUSE FUNDS
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
FAR EAST GROWTH FUND ASEAN GROWTH FUND
---------------------------------- --------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995
---------------------------------- --------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income $ 19,460 $ 18,109 $ 16,271 $ 10,974
Net realized gain (loss) on investments
and foreign currency related transactions 7,169 (112,530) (25,448) (79,860)
Net unrealized appreciation (depreciation) on
investments and foreign currency
denominated assets and liabilities 73,993 (33,193) 92,340 7,521
-------------- ----------------- -------------- --------------
Net increase (decrease) in net assets
resulting from operations 100,622 (127,614) 83,163 (61,365)
-------------- ----------------- -------------- --------------
Distributions declared to shareholders from:
Net investment income - (304) - (10,974)
In excess of net investment income - - - (6,231)
In excess of net realized gain on investments
and foreign currency related transactions - (55,346) - -
-------------- ----------------- -------------- --------------
Total distributions declared to shareholders - (55,650) - (17,205)
-------------- ----------------- -------------- --------------
Fund share transactions: (Note 4)
Proceeds from sale of shares 45,938 132,325 - 88,047
Net asset value of shares issued to shareholders
in payment of distributions declared - 53,707 - 14,847
Cost of shares repurchased (83,543) (324,600) (149,251) (125,776)
-------------- ----------------- -------------- --------------
Net increase (decrease) in net assets
resulting from Fund share transactions (37,605) (138,568) (149,251) (22,882)
-------------- ----------------- -------------- --------------
Total increase (decrease) in net assets 63,017 (321,832) (66,088) (101,452)
NET ASSETS:
Beginning of period 1,665,589 1,987,421 1,012,242 1,113,694
-------------- ----------------- -------------- --------------
End of period (including undistributed
(distributions in excess of) net
investment income of $51,215, $31,755
$16,000 and ($271), respectively) $ 1,728,606 $ 1,665,589 $ 946,154 $ 1,012,242
============== ================= ============== ==============
</TABLE>
See accompanying Notes to the financial statements. 7
FAR EAST GROWTH FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1995 1994**
---------------- ---------------------------------
---------------- ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.88 $ 9.81 $ 10.00
------------ ------------ ------------
Income (loss) from investment operations:***
Net investment income (a) 0.110 0.097 0.014
Net realized and unrealized gain (loss) on investments
and foreign currency related transactions 0.430 (0.734) 0.074
------------ ------------ ------------
Total from investment operations 0.540 (0.637) 0.088
------------ ------------ ------------
Less distributions declared to shareholders:
From net investment income - (0.001) (0.013)
From net realized gain on investments and foreign
currency related transactions - - (0.265)
In excess of net realized gain on investments and
foreign currency related transactions - (0.292) -
------------ ------------ ------------
Total distributions declared to shareholders - (0.293) (0.278)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 8.88 $ 9.81
============ ============ ============
TOTAL RETURN (B) 6.08% (6.47%) 0.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 1,729 $ 1,666 $ 1,987
Net expenses to average
daily net assets (a) 2.35% 2.35% 2.35%
Net investment income to average
daily net assets (a) 2.30% 1.01% 0.19%
Portfolio turnover rate 3% 107% 52%
Average commission rate $ 0.0010 N/A N/A
(a) The investment adviser waived its management fee and reimbursed the Funds for certain other expenses for the
periods indicated. Had the waiver and reimbursement of expenses been limited to that as required by state
securities law, the net investment income per share and ratios would have been:
Net investment loss $ (0.196) $ (0.660) $ (0.558)
Net expenses to average
daily net assets 8.97%* 10.24% 10.11%*
Net investment loss
to average daily net assets (4.32%)* (6.88%) (7.57%)*
(b) The total returns would have been lower had certain expenses not been waived during the
period shown. Amount is not annualized.
* Annualized.
** For the period from January 25, 1994 (commencement of operations) to December 31, 1994.
*** Per share amounts for the year ended December 31, 1994 have been calculated using the
monthly average share method which more approximately presents the per share data for
the period, since the use of the undistributed method does not accord with the results
of operations.
</TABLE>
8 See accompanying Notes to the financial statements.
ASEAN GROWTH FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED DECEMBER 31,
(UNAUDITED) 1995 1994**
------------ -------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.47 $ 9.11 $ 10.00
------------ ------------- ------------
Income (loss) from investment operations:***
Net investment income (a) 0.158 0.091 0.078
Net realized and unrealized gain (loss) on investments
and foreign currency related transactions 0.572 (0.588) (0.808)
------------ ------------- ------------
Total from investment operations 0.730 (0.497) (0.730)
------------ ------------- ------------
Less distributions declared to shareholders:
From net investment income - (0.091) (0.076)
In excess of net investment income - (0.052) -
From net realized gain on investments and foreign
currency related transactions - - (0.065)
In excess of net realized gain on investments and
foreign currency related transactions - - (0.019)
------------ ------------- ------------
Total distributions declared to shareholders - (0.143) (0.160)
------------ ------------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.20 $ 8.47 $ 9.11
============ ============= ============
TOTAL RETURN (B) 8.62% (5.42%) (7.29%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 946 $ 1,012 $ 1,114
Net expenses to average
daily net assets (a) 2.35%* 2.35% 2.35%*
Net investment income to average
daily net assets (a) 3.30%* 1.04% 0.97%*
Portfolio turnover rate 0% 81% 59%
Average commission rate $ 0.0153 N/A N/A
(a) The investment adviser waived its management fee and reimbursed the Funds for certain other expenses for the periods
indicated. Had the waiver and reimbursement of expenses been limited to that as required by state securities law, the
net investment income per share and ratios would have been:
Net investment loss $ (0.451) $ (1.138) $ (0.902)
Net expenses to average
daily net assets 15.05%* 16.39% 14.54%*
Net investment loss
to average daily net assets (9.39%)* (13.00%) (11.22%)*
(b) The total returns would have been lower had certain expenses not been waived during the
period shown. Amount is not annualized.
* Annualized.
** For the period from January 25, 1994 (commencement of operations) to December 31, 1994.
*** Per share amounts for the year ended December 31, 1994 have been calculated using the
monthly average share method which more approximately presents the per share data for
the period, since the use of the undistributed method does not accord with the results
of operations.
</TABLE>
See accompanying Notes to the financial statements. 9
ASIA HOUSE FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Asia House Funds (the "Trust") is a Delaware Business Trust registered under
the Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Trust currently consists of two diversified
portfolios, the Far East Growth Fund and the ASEAN Growth Fund,
(individually "a Fund" and collectively "the Funds"), which commenced
operations on January 25, 1994. The Declaration of Trust permits the
Trustees to create an unlimited number of funds, each of which issues a
separate series of shares. The following is a summary of significant
accounting policies consistently followed by the Funds in the preparation of
their financial statements.
PORTFOLIO VALUATION
Equity securities listed or regularly traded on a securities exchange are
valued at the last quoted sales price on the day the valuations are made. A
security which is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary market for such
security. Equity securities identified as "foreign shares" may be valued at
the value assigned to "local shares" of the same companies on days where
there are no valuations available for the foreign shares. Other equity
securities and those listed securities that are not traded on a particular
day are valued at a price within the limits of the latest bid and asked
prices deemed best to reflect fair value by the Board of Trustees or by
persons delegated by the Board. Debt securities are generally traded in the
over-the-counter market and are valued at a price deemed best to reflect
fair value as quoted by dealers who make markets in these securities or by
an independent pricing service. Short-term debt obligations and money market
securities maturing in sixty days or less are valued at amortized cost which
approximates value. Non-U.S. dollar denominated short-term obligations
maturing sixty days or less are valued at amortized cost as calculated in
the base currency and translated into United States (U.S.) dollars at the
current exchange rate. Assets and liabilities for which the above valuation
procedures are inappropriate or are deemed not to reflect fair value are
stated at fair value as determined in good faith by or under the supervision
of the officers of the Trust as authorized by the Board of Trustees.
FOREIGN CURRENCY TRANSLATION
The books and records of the Funds are maintained in U.S. dollars.
Investment valuations and other assets and liabilities initially expressed
in foreign currencies are converted each business day into U.S. dollars
based upon current exchange rates. Purchases and sales of foreign
investments and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment security transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Funds and the amount actually
received. The portion of foreign currency gains and losses related to
fluctuation in exchange rates between the initial purchase trade date and
subsequent sale trade date is included in realized gains and losses on
investment securities sold. That portion of both realized and unrealized
gains and losses on investments that results from fluctuations in foreign
currency exchange rates is not separately disclosed.
10
ASIA HOUSE FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
- --------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS
The Funds may enter into forward currency contracts in connection with
planned purchases or sales of securities or to hedge the value of some or
all of a Fund's portfolio securities. A forward currency contract is an
agreement between two parties to buy and sell a currency at a set price on a
future date. The market value of a forward currency contract fluctuates with
changes in forward currency exchange rates. Forward currency contracts are
marked to market daily and the change in value is recorded by the Fund as an
unrealized gain or loss. When a forward currency contract is extinguished,
through delivery or offset by entering into another forward currency
contract, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value of
the contract at the time it was extinguished or offset. The Funds could be
exposed to risk if the counterparties are unable to meet the terms of the
contracts or if the value of the currency changes unfavorably relative to
the U.S. dollar.
REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements with certain banks and
broker/dealers whereby a Fund acquires a security for cash and obtains a
simultaneous commitment from the seller to repurchase the security at an
agreed upon price and date. The Fund, through its custodian, takes
possession of securities collateralizing the repurchase agreement. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The collateral is marked to
market daily to ensure that the market value including accrued interest of
the underlying assets remains sufficient to protect the Fund in the event of
default by the seller. In connection with transactions in repurchase
agreements, if the seller defaults and the value of the collateral declines
or if the seller enters insolvency proceedings, realization of collateral by
the Fund may be delayed or limited. The Funds will enter into repurchase
agreements only with dealers or banks determined by the Adviser to present
minimal credit risks pursuant to procedures established by the Board of
Trustees to evaluate creditworthiness.
TAXES
The Funds' policy is to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies and to distribute to
shareholders each year all of its net investment income, and any net
realized capital gains. Accordingly, no provision for federal income or
excise tax is necessary. Withholding taxes on foreign dividends have been
provided for in accordance with the Trust's understanding of the applicable
country's tax rules and rates.
11
ASIA HOUSE FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
The Funds intend to declare distributions from net investment income and net
realized short-term and long-term capital gains, if any, annually. All
distributions will be paid in shares of the Funds, at net asset value,
unless the shareholder elects to receive cash distributions. Income
distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions, losses deferred due to wash
sales, excise tax regulations and utilization of capital loss carryovers.
Permanent differences relating to shareholder distributions will result in
reclassifications to paid-in capital.
INVESTMENT TRANSACTIONS AND INCOME
Security transactions are accounted for on the trade date. Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
However, if the ex-dividend date has passed, certain dividends from foreign
securities are recorded when the Fund is informed of the ex-dividend date.
Interest income is recorded on the accrual basis. In determining the net
realized gain or loss on securities sold, the cost of securities is
determined on the identified cost basis.
EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual Fund. Expenses which are not readily identifiable to a specific
Fund are allocated in such manner as deemed equitable by the Trustees,
taking into consideration, among other things, the nature and type of
expense and the relative size of the Funds.
DEFERRED ORGANIZATION EXPENSES
Costs incurred by the Funds in connection with its organization have been
deferred and are being amortized on a straight-line basis over a five year
period beginning on the commencement of operations. In the event that any of
the initial shares of the Funds are redeemed during such amortization
period, the Funds will be reimbursed for any unamortized costs in the same
proportion as the number of shares redeemed bears to the number of initial
shares outstanding at the time of redemption.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting policies requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results could differ from those
estimates.
12
ASIA HOUSE FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
- --------------------------------------------------------------------------------
INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments of domestic securities.
These risks may involve adverse political and economic developments and the
possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets may be less liquid and their prices
more volatile than those of securities of comparable U.S. companies and U.S.
securities markets.
INTERIM FINANCIAL INFORMATION
The interim financial statements relating to June 30, 1996 have not been
audited by independent certified public accountants, but in the opinion of
the Funds' management, reflect all normally recurring adjustments necessary
for the fair presentation of the financial statements.
2. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds pay Asia House Investments Inc., the Funds' adviser (the
"Adviser"), for management and investment advisory services at an annual
rate of 1.20% of average daily net assets. The Adviser has currently agreed
to waive its fee and additionally reimburse each Fund to the extent that
each Fund's annual expenses (including management fee but excluding taxes,
interest, extraordinary expenses and brokerage commissions or transaction
costs) exceed 2.35% of average daily net assets.
Certain officers and trustees of the Funds are also officers or trustees of
the Adviser. No officer or trustee of the Adviser receives any compensation
from the Funds for serving as Trustee or officer of the Funds.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the six months ended June 30, 1996 were as
follows:
Purchases Sales
--------------- ---------------
Far East Growth Fund $29,448 $724,667
ASEAN Growth Fund $1,549 $308,177
13
ASIA HOUSE FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
- --------------------------------------------------------------------------------
4. SHARE TRANSACTIONS
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value).
Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
Far East Growth Fund ASEAN Growth Fund
====================================== =====================================
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1996 December 31, 1995 June 30, 1996 December 31, 1995
(Unaudited) (Unaudited)
------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C>
Shares sold 5,142 14,510 --- 10,324
Shares issued to shareholders in
reinvestment of distributions --- 6,082 --- 1791.00
Shares repurchased (9,190) (35,598) (16,717) (14,845)
------------------ ------------------ ----------------- ------------------
Net decrease (4,048) (15,006) (16,717) (2,730)
Fund shares:
Beginning of period 187,582 202588.00 119,565 122,295
------------------ ------------------ ----------------- ------------------
End of period 183,534 187,582 102,848 119,565
================== ================== ================= ==================
Percentage of shares held by Asia House
Investments Inc. and interested
directors of the Fund (or affiliates
thereof) at the end of the period 62.71% 62.82% 56.03% 60.88%
================== ================== ================= ==================
Percentage of shares held by other
individuals in excess of 10% of
outstanding shares at the end of the
period 20.39% 19.95% 20.13% 17.31%
================ ================= ============= =====================
</TABLE>
14
