5/13/10 Epa¢k

04/10/23

Epa¢kGhana’s # 1 Mutual Fund

The Epa¢k Story –

The Making of A Pan-African Mutual Fund

By: Kwesi Amonoo-Neizer Executive Director, Databank Asset Management

Services Limited

04/10/23


Contents• Background

• Investment Objective

• Investment Policy & Strategy

• Investments of Epack

• Adventuring into Africa

• Performance

• Conclusion

04/10/23


Background-How Did it Start?

• The Epack concept was borne at presentation to a pre-retirement Association of Bank of Ghana (BoG) workers

• Originally designed to enable 5 BoG staff to participate collectively in the Ghana stock market via an Investment Club.

• Transformed from an investment club into an Investment Company in 1998

• Converted from an investment company into a Mutual Fund in 2002, managed by Databank.

04/10/23

Epa¢kGhana’s # 1 Mutual Fund Background

-Special Feats

• Epa¢k is the 1st licensed equity mutual fund in Ghana

• Epa¢k is listed on the highly reputed global mutual fund website, called the Morning Star

• A pan-African Equity mutual Fund holding investments in 10 countries

04/10/23


• Epa¢k is a long-term fund and therefore invests in the shares of listed companies

• As of Dec. 2006, the Fund held investments in Ghana and in 9 other African markets (Nigeria, Botswana, Kenya, South Africa, Mauritius, Uganda, Zambia, Morocco and Malawi).

Background-Type of Fund?

04/10/23

Epa¢kGhana’s # 1 Mutual Fund Background-

Growth of Shareholders

5Over 65,000

Dec. 1996 Sept., 2007

Fig. 1

04/10/23


Investment Objective

• Objective of the Fund is to provide long-term capital growth via:

• Investing in a diversified portfolio of listed shares in regulated markets in Ghana & Africa.

• It’s mainly an equity fund - up to 80% of portfolio

04/10/23


Investment Policy & Strategy• Value investments philosophy-That’s identify and

invest in firms which are expected to provide superior returns over a 5-year period.

• Macro economic fundamentals are important but not enough

• Quality/soundness of underlying business of stocks is vital to our investment decision making- ‘Bottom-up Approach’

• Valuation model is based on intrinsic value of stocks

04/10/23


Fig. 2Investments of Epack

04/10/23

Epa¢kGhana’s # 1 Mutual Fund Investments of Epack

1997 1998 1999 2000 2001 2002

Share Price ¢179.50 ¢399.1 ¢388.5 ¢465.06 ¢701.37 ¢1,191.63

Epack Value (¢ million) 49.39 385.89 772.08 1,265.17 2,930.64 10,513.95

Epack Value ($ million) 0.02 0.16 0.22 0.18 0.40 1.26

No. of Stocks 11 10 12 13 12 13

Top 5 as % of total portfolio

73% 74% 67% 62% 56% 52%

No. of markets 1 1 1 1 1 1

No. of Industries 6 6 7 7 7 7

Stock as % of total portfolio

96% 98% 95% 86% 85% 76%

Table: 1

* As at 28 Sept, 07

04/10/23

Epa¢kGhana’s # 1 Mutual Fund Investments of Epack

2003 2004 2005 2006 2007*

Share Price ¢2,822.38 ¢4,536.91 ¢4,326.95 ¢5,707.76 ¢7,728

Epack Value (¢ million) 74,998 325,564 254,642 382,921 693,877

Epack Value ($ million ) 8.52 36.05 28.02 41.58 73.59

No. of Stocks 25 52 54 37 39

Top 5 as % of total portfolio

44% 28% 31% 29 24%

No. of markets 2 6 7 9 10

No. of Industries 8 11 11 9 10

Stock as % of total portfolio

69% 76% 87% 77% 77%

Table: 2

* As at 28 Sept, 07

04/10/23

Epa¢kGhana’s # 1 Mutual FundTop 5 Holdings –Half Yr 07

Ghana Comm. Bank: 8%

Guaranty Trust Plc : 7%

First Bank Nigeria Plc: 6%

Unilever Ghana Ltd: 6%

Standard Chartered Bank:4%/Mauritius Comm Bank: 4%

Fig. 3

04/10/23


Fig. 4

Investments of Epack -Holdings in Africa

Country Diversification (Equity Portfolio)

3.15%

0.99%7.14%

12.82%

7.81%

20.25%

5.98%

0.02%

0.63%

41.21%

Botswana Ghana Kenya Malawi Mauritius Morocco Nigeria South Africa Uganda Zambia

Half Yr 07

04/10/23


Internationalisation- Epack’s Adventuring in Africa

04/10/23

Epa¢kGhana’s # 1 Mutual Fund Adventuring in Africa

Fig. 5

Epack Presence

04/10/23


Adventuring in Africa

Nigeria Experience

• Foray into Nigeria in July 2003;

• At that time, Nigeria was regarded as high risk;

• It was seen to be off limits to foreigners;

• Evidence showed that the NSE was an attractive investment;

• Average dollar return between 1998 – 2003 was 7% compared to -1% for the GSE;

04/10/23

Epa¢kGhana’s # 1 Mutual FundAdventuring in Africa (Cont’d)

• Several companies traded at attractive valuations;

• Main challenge was to locate a custodian;

• Only one custodian at that time;

• Choice of broker was also challenging;

• Communication systems made T + 3 settlement very challenging;

04/10/23


Adventuring in Africa (Cont’d)

StockPurchases (US$)

Dividends

Sales

Value as at 30/9/07

Total Return

Holding Period

First Bank 1,617,837 216,899 1,581,342 3,709,514 240.44% 4yrs

Union Bank 209,840 11,788 200,053 0.95% 2yrs

Guaranty Trust 552,456 112,455 2,922,574 449.37% 4yrs

United Bank For Africa 719,938 63,134 1,464,290 112.16% 3yrsZenith Bank 785,538 53,989 372,639 1,497,340 144.92% 3yrs

Cadbury 24,036 961 39,188 67.04% 2yrs

7 UP 62,891 5,395 87,781 48.16% 2yrs

Nestle 48,349 3,961 69,476 51.89% 2yrs

UACN 146,222 13,034 501,925 252.18% 4yrs

UAC-Prop 34,323 2,299 43,634 33.83% 2yrs

Total 33,432 2,451 55,824 74.31% 2yrs

Ashakacem 286,752 307,057 7.08% 1yr

Cornerstone 344,541 367,304 557,830 168.51% 1yr

PZ Nigeria 109,244 22,370 315,056 208.87% 4yrs

4,975,399 508,736 4,588,587 9,504,239 193.48%

Table: 5

04/10/23


Mauritius Experience

• First investments made in October 2004;

• Economy had shifted into a low growth phase;

• Traditional economic drivers such as sugar and textiles were in decline;

• Serious debate on how to re-establish high growth levels;

• Tourism and financial sector identified as future growth pillars;

04/10/23


Adventuring in Africa (Cont’d)• Move to develop a knowledge based economy with

outsourcing at the centre;

• Challenge of how to deploy redundant workforce;

• Friendly foreign investor climate;

• Low levels of liquidity;

• Market seemed fairly valued on historical basis but cheap compared with other markets.

04/10/23


Adventuring in Africa (Cont’d)Stock

Purchases (US$) Dividends Sales

Value as at 30/9/07 Total Return

Holding Period

MCB 1,463,376 193,079 957,865 2,792,533 169.48% 3yrs

SBM 912,329 237,874 2,005,226 145.87% 3yrs

Rogers 310,597 36,808 764,037 157.84% 3yrs

NMH 234,601 35,399 422,862 95.34% 2yrs

SR 169,348 37,921 335,227 120.34% 3yrs

Medine 1,719,960 13,264 1,499,754 -12.03% 1yr

4,810,212 554,346 1,380,727 7,396,776 94.00%

Table: 6

04/10/23


Kenyan Experience• First investment made in March 2004;

• Country was just coming out of a period of bad governance;

• • Kenya was emerging from a period of low growth rates;

• Perceived to be corrupt;

• Country was experiencing bad foreign press;

04/10/23


• Very little foreign interest in the stock market;

• Relatively well-developed capital markets;

• Domestic interest in the stock market was beginning to pick-up;

• Large capitalized stocks were fairly liquid.

04/10/23


StockPurchases (US$) Dividends Sales

Value as at

30/9/07 Total Return

Holding Period

EABL 102,252 4,356 198,935 98.81%

1yrs

Barclays 155,035 14,433 242,727 65.87% 1yrs

Standard Chartered 148,357 5,704 121,111 -14.52%

1yrs

Kenya Airways 511,060 20,872 1,261,052 438,857 236.71%

2yrs

CMC 326,011 751,736 24,500 138.10% 1yrs

1,242,715 45,365 2,575,561 463,357 148.19%

Table: 7

04/10/23


Adventuring in Africa (Cont’d)Lessons• A well conceived investment strategy and philosophy can

be applied both domestically and internationally;

• It is possible to enhance returns and reduce risk through international diversification;

• Mobilization of resources in Africa for Africans is possible and very feasible;

• If it can be done in Ghana, it can be done in the other African Countries;

04/10/23


Adventuring in Africa (Cont’d)• Nearly all the African Funds target non-African investors;

• Need to make these opportunities available to Africans through the creation of collective investment industry for Africans;

04/10/23


Adventuring in Africa (Cont’d)

Challenges• The need for greater co-operation between regulators and

market operators in the development of the industry;

• Existence of over-regulation in many markets;

• Need to make it easier for capital to flow between African countries;

• Resistance to opening up the capital account;

04/10/23


Adventuring in Africa (Cont’d)• Pension reforms have increased the pool of capital;

• Doubtful whether all of it can be effectively employed local;

• Be careful that our enthusiasm does not lead to investment bubbles;

• In the mid – 1990’s, Africa was referred to as the last frontier;

• How is this frontier different from the frontier in the mid-1990’s?

04/10/23


How Has Epack

Performed

?

04/10/23


Performance-ROI

• Epa¢k has been the best performing mutual fund in Ghana and one of the best in Africa with a consistent 10 year record

• Cumulative ROI since inception was 974% in $ terms as at December 2006 and 1,249% in $ terms as at July 31, 2007

• YTD ROI as at Sept 28, 2007: [ 32.2% in $ terms]

04/10/23


Performance-ROI

*ABRALL Returns is over 9 years

Fig. 6

1249%

187% 150%30%

0%

200%

400%

600%

800%

1000%

1200%

1400%

Epack (USD) DSI (USD) ABRALL (USD*) MSCI EM (USD)

Comparative Performance (96-07 Jul)

04/10/23


Performance-ROI

*ABRALL Returns is over 9 years

Fig. 7

27%

10% 11%

2%

0%

5%

10%

15%

20%

25%

30%

Epack (USD) DSI (USD) ABRALL(USD*)

MSCI EM(USD)

Annualised Yearly Performance (96-07Jul)

04/10/23

Epa¢kGhana’s # 1 Mutual Fund Performance-ROI

Epa¢k Yearly Returns Oct. 1996-Dec. 2006

Source: Databank Research

Table: 8

Year ¢ returns $ returns1996 -2% -2%1997 82% 41%1998 123% 113%1999 -3% -35%2000 20% -39%2001 51% 43%2002 70% 48%2003 137% 125%2004 60% 57%2005 -4% -5%2006 32% 30%Avg AnnualReturns

51% 34%

04/10/23


5616%

1696% 1515% 1324%536% 625%

0%

1000%

2000%

3000%

4000%

5000%

6000%

Epack 91-DayBill

Shares I YearBond

Dollar Inflation

Comparative Returns Oct 1996-Dec 2006

Performance-ROI

Source: Databank Research

Fig. 8

04/10/23


• Epa¢k started with only ¢250,000 [$27] in 1996.

• Value as of Dec. 2006, was ¢382bn [$41.3m]

• Value is as at 18 Oct., 07) ¢737bn [$78m]

Performance –Value of Funds

04/10/23

Epa¢kGhana’s # 1 Mutual Fund Performance –

Value of Funds Table. 9

Date in ¢ in $ Yearly $ Growth

1997 49 21,951 N/A1998 386 164,488 649%1999 772 220,657 34%2000 1,265 183,643 -17%2001 2,931 403,935 120%2002 10,514 1,258,868 212%2003 74,998 8,517,177 577%2004 325,564 36,054,677 323%2005 254,642 28,019,031 -22%2006 382,921 41,575,618 48%

2007 YTD* 737,182 78,186,562 88%*As at Oct. 18 2007

04/10/23


Performance –Market Share

• Epa¢k has the biggest market share among all the 9 mutual funds in Ghana (both equity and money market funds)

• Market share by value of funds under management as at Dec. 2006 was 57% (Databank Research)

• Market share by size of customers as at Dec. 2006 was 63% (Databank Research)

04/10/23

Epa¢kGhana’s # 1 Mutual Fund Conclusion

• The introduction of Epa¢k in Ghana in 1996 was an innovation in its own right:

• Epa¢k is not only the 1st licensed mutual Fund in Ghana but also a Pan-African Mutual Fund with investments in 10 African countries

04/10/23


• Epa¢k has been the best performing mutual fund in Ghana and one of the best in Africa with a consistent 10 year record.

• Cumulative returns on Epa¢k over the last decade has surpassed comparable instruments in the African market.

04/10/23


• Databank, is a leading brand in investment banking in Ghana/Africa- Credited with many firsts in the market such as:

• First to develop a market index, the Databank Stock Index (DSI) for the GSE;

• First to introduce an equity mutual fund, Epack

• First to introduce a money market mutual fund, Databank Mfund;

• And recently voted as the Best Research Firm in Africa by Ai Index Series Awards in London.

04/10/23


• Databank, has leveraged on its:

• Strategic Vision• Well-trained and experienced Human Resources• Sound Management Practices• International Networks• Capabilities & Commitment

• To enable many Ghanaians and other nationals meet various financial goals.

• It can be done for you too!

04/10/23


Thanks for your

Audience Epa¢k – Ghana’s # 1 Mutual Fund!

www.databankgroup.com

5/13/10 Epa¢k

Documents

Transcript of 5/13/10 Epa¢k