Port louis fund (edited)

PORT LOUIS FUND LTD

Port Louis Fund Ltd

The company is an open-ended mutual fund incorporated on 9 June 1997 as a Public Company with limited liability.

Management Company: Capital Asset Management Ltd

The latter is wholly owned subsidiary of SIC. CAM is licensed by the Financial Services Commission as a CIS Manager and Investment Advisor (Unrestricted) under the Securities Act 2005.

Mutual fund investing in various asset classes

Investment Strategies

• The asset allocation of the Fund is being reviewed on a periodicbasis in light of changes in market conditions so as to beconsistent with the long-term goal.

• The asset has been allocated with a view to meet theobjectives.

The investment portfolio of the Fund

has been classified into the four main asset

classes

Listed Equities

Unquoted Shares

Foreign Investments

• FixedIncomeSecurities& Others

Objectives of the Firm

1. To carry on business as an investment holding company.

• To acquire, invest in, hold and manage securities and properties of all kinds

• In a view of making revenue and profit

Objectives of the Firm(continued…)

2. To deal in securities and properties of all kinds.

• Sell, deal in, or dispose of any of the foregoing

• To discount, buy and sell bills, notes, options, and any other negotiable or transferable securities.

Objectives of the Firm(continued…)3. To manage and advise on investment funds.

• Other things that may help to lead to the achievement of the above objectives.

• Furthermore to achieve long term capital growth,

• by investing in a combination of performing listed companies, in prime unquoted companies and in financial instruments.

Capital Appreciation

• To grow the principal value of its investments over time

• Invest in securities that have shown a moderate to above average degree of risk

• Examples: common stocks, equity mutual funds and index funds.

Income

• Can be generated from investments

• Examples: high quality, short and medium-term fixed income products, short-term bond funds.

• To summarise, Port Louis Fund Ltd seeks long term capital growth with a reasonable income yield.

Strategic Asset Allocation

Weightage of the asset classes

Tactical Asset Allocation

2004

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Locally Listed Equities

2004Listed Equities

• Decreased in percentage terms from 57.3% in 2003 to 45.4% in2004.

• Listed investments worth Rs 174.8m were disposed and sharesworth Rs 12.0m on the local market were acquired.

• Exposure in the Bank and Insurance sector and the Hotels sectorwere reduced from 22.3% to 16.3% and from 13.1% to 9.6%respectively.

• mainly done in order to capitalise the gain of these two sectorsin the market. The proceeds received were earmarked forforeign investment.

• Gain on disposal of investment had gone up significantly to Rs24.4m (2003: Rs 0.36m).

2005

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2005Listed Equities

• Decreased in percentage terms from 46.1% in 2004 to 40.2% in2005.

• Exposure in Banks and Insurance was reduced from 16.8% to13.2% this year and same for the transport sector from 11.0% to8.7%.

• Decrease was due to the change in asset allocation. Proceedsfrom investment were used to finance foreign investment.Foreign investment increased from 5.1% in 2004 to 18.7% in2005.

• On the other hand, exposure to the Hotels sector was increasedfrom 9.7% to 10.1% was due to that the tourism sector wasexpected to grow.

2006

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2006Listed Equities

• Decreased in percentage terms from 40.2% in 2005 to 36.0% in2006. The value of listed and quoted investment amounted to Rs330.1m (2005: Rs 363.6m).

• During the year, listed investments worth Rs 85.0m weredisposed and Rs 21.3m of investments were acquired.

• Exposure in transport and hotel sectors was reduced rom 8.7%to 4.1% and 10.1% to 8.8% respectively, in order to furtherincrease foreign investment.

• The foreign investment had substantially been increased from Rs168.5m (18.7%) to Rs 253.4m (27.7%) in 2006.

• Exposure to the Transport and Industry sectors were reduced through disposal ofshares due to the increase in the prices of fuel during that time

• Banking and insurance sector change was due to an increase in their value andexposure in hotel sectors had been increased and this was because Tourism being amajor pillar of growth was doing exceedingly well and the number of tourist arrivalswas expected to reach above 900,000 that year

•Investment growth was mostly attributable to high investment in hotels and IRSprojects

2007

•Total buy for the year amounted to Rs 41.7m whereas total disposal was Rs 119.8 m.This is clearly a defensive measure from the investment manager since many sectorsare confronted to the risk of recession in foreign markets and decline in global stockmarkets

•Holdings in Banks and Insurance sector increased by 4.97% due to an increase in valueof shares held.Why? Our Banks were still being profitable!

•The fund acquired some shares in the Leisure and Hotel sector as they were excellingin 2007 and was found to be underweighted in the portfolio of the fund and has beeninvesting in high growth local stock

•Exposure to the Commerce and Industry sectors were reduced through disposal ofshares as the risk associated with their return wasn’t according the level set by the fund

2008

•Holdings in Banking & Insurance sector decreased by 3.2% partly due to a decline invalue and partly due to disposal of shares. Even though the financial crisis had a laggedeffect on the Mauritian economy , for the near future of banks were not optimistic

•The decrease in holdings in the leisure and hotel sector is explained by a fall in valuegiven the fact that the tourism industry was still suffering from recession prevailing inour leading tourist markets

•The Fund also increased its exposure in commerce and investment sectors. This couldbe due to the government initiative to increase investment in public infrastructurethrough their additional stimulus package.

2009

2010Locally Listed Equities

• Acquisition of Shares amounted to Rs33.3m

• Investment, sugar, commerce and banking sectors

• Major infrastructural projects such as the Jin Feiand ring road are likely to impact positively on the economy and that can be a reason for the increase in the investment sector.

• Shares disposed amounted to Rs26.7m

• Hotels, investment and transport sectors

• The hotels were experiencing reductions in their revenues and profits due to the Euro Crisis zone that’s why the investor manager decided to sell some shares of the hotel sector.


• Shares bought amounted to Rs25.5m

• Sugar and commerce sectors

• Shares disposed valued at Rs45.5m

• Banking & insurance, hotel and investment sectors


• Shares bought valued at Rs3.10m

• Investment and banking sectors

• Shares of BramerBanking Corporation Ltd have been bought

• Shares disposed amounted to Rs5.03m

• Hotel and finance sectors

• Due to Euro Debt Crisis, want to reduce financial risk

• Reductions of the number of arrivals of tourists

Ratio Analysis

The ratios which have been taken into consideration with Port Louis Fund are Profitability Ratios: o Net Profit Margin

Management /Expenses Ratio

Liquidity Ratios: o Current Ratios Investment ratios:o Earnings Per shareo Earnings Yieldo Dividend per shareo Dividend Yieldo Price Earnings Ratio

Expenses Ratio • is a measure of what it costs the investment company to operate a

mutual fund.

• The figures for the expenses ratio have been taken directly from the annual reports of the fund and the figure below show the latter has changed during these ten years:

• The expense ratio has been fluctuating over this decade. It is at its peak in year 2007 due to the

• fact that the management fee paid is based on a gradual fee structure which is related to the performance of the Fund.

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1.6

2002 2004 2006 2008 2010 2012 2014

Management Ratios/Total Expenses Ratio:

Management Ratios/TotalExpenses Ratio:

Liquidity Ratio

• determines a company's ability to pay off its short-terms debts obligations. • Current Ratio measures a company's ability to pay short-term obligations

and is given by

• Current Ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

• From this chart, it can be deduced that Port Louis has not faced any problem in meeting its short term obligations as the graph is always lying above the x-axis.

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2002 2004 2006 2008 2010 2012 2014

Current Ratio

Current Ratio

Investment Ratios• Earnings per share

• are the portion of a company's profit allocated to each outstanding share of common stock and it is calculated

• Earnings per share = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑠𝑡𝑜𝑐𝑘

𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒𝑠 𝑖𝑠𝑠𝑢𝑒𝑑

• Earnings Yield

• shows the percentage of each dollar invested in the stock that was earned by the company and is given by:

• Earnings Yield = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

Earnings per share and Earnings Yield

• From the diagram above, it can be deduced that both ratios have been doing well during this interval. However, only in year 2009 both ratios fell considerably and the reason behind this worsening situation is due to the financial crisis.

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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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Earnings yield

Earnings per share

Dividend per share and Dividend yield • Dividend per share

• is the sum of declared dividends for every ordinary share issued. The values for the dividend per share have been taken directly from the annual reports of Port Louis Fund.

• Dividend Yield

• is a financial ratio that shows how much a company pays out in dividends each year relative to its share price. It is calculated by the following:

• Dividend Yield = 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

Dividend per share and Dividend yield • From this chart, it has been noticed that these

ratios have been continuously changing. The lowest dividend per share has been paid in year 2009

Price Earnings Ratio

• a widely used ratio which helps the investors to decide whether to buy shares of a particular company.

• Price Earnings ratio = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

• From this diagram, it is to be seen that there has been some ups and downs in this ratio with a negative price earnings ratio being paid again in year 2009.

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2002 2004 2006 2008 2010 2012



• Hence based on the ratios calculated, it can be noted that this Asset Management has been performing very well prior to the financial crisis. However, post the financial crisis, the performance of this fund has been deteriorating. Nevertheless, it can be noticed that the latter is on its mend.

For our analysis, a comparison between the return of Port Louis Fund (PLF) and the return of the Stock Exchange of Mauritius (SEM) have been made.

The following graph depicts the return from 2003 to 2012 of listed equities both for PLF and SEM

Beta Coefficient

• It shows the riskiness of the fund as compared to the market.

• Beta=1 :as risky as the market

Beta<1 :less risky than the market

Beta>1 :riskier than the market

2003PLF

• Return 38.1%• Higher performance than the

benchmark• Return mainly explained by a

general increase in the market price of listed equities

• Beta of the fund was 0.72

SEMDEX

• Return 35.1%

2004• PLF


benchmark• The decline in return is because the

fund has reduced its exposure to banking, insurance and hotel sectors which were major components

• Beta was 0.70

SEMDEX

• Return 35.4%

2005• PLF


benchmark• The decline in return is because the

fund has reduced its exposure to banking, insurance and finance sectors which were major components

• Beta was 0.68

SEMDEX

• Return 10.4%

2006• PLF

• Return 12.7%• Lower performance than the

benchmark• This is because major components

of the fund did not perform in line with the market

• Beta was 0.64

SEMDEX

• Return 16.3%

2007• PLF

• Return 58%• Lower performance than the

benchmark• Did not perform as well as SEM as

the fund was overweighed with securities which didn’t perform in line with the market and underweighted with securities which did perform well

• Beta was 0.54

SEMDEX• Return 70.3%

2008PLF

• Return 23.3%• Lower performance than

benchmark• Due to underweight in some

securities in the banking and sugar sectors which outperformed the market

SEMDEX

• Return 28.5%

2009PLF

• Negative return 18.1%• Better performance than

benchmark• Due to financial crisis and

consequently a general fall in market value of listed equities occur.

SEMDEX

• Negative return 23.1%

2010PLF

• Return 16.4%• Slightly lower performance than

benchmark• due to the local acquisition of

shares being mainly in investment, sugar, commerce and banking sectors

SEMDEX

• Return 16.7%

2011PLF

• Return 30.4%• Higher performance than

benchmark• due to an increase in local

acquisition contributing a return of 13.4%

SEMDEX

• Return 26.8%

2012PLF

• Negative return 1.1%• Lower performance than

benchmark• Because investors were sceptic due

to the exposure of many companies to the on-going crisis

SEMDEX

• Return 15.3%

In conclusion, during the past 10 years, PLF performed relatively well as its return was higher as compared to SEM.

For the first 5 years, the beta of less than one showed that the fund is less risky than the market, that is when the market is falling or rising rapidly the Fund had a certain degree of resilience

Thank You

Port louis fund (edited)

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Transcript of Port louis fund (edited)