5/13/10 Epa¢k

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5/13/10 Epa¢k

  1. 1. The Epa ¢ k Story – The Making of A Pan-African Mutual Fund By: Kwesi Amonoo-Neizer Executive Director, Databank Asset Management Services Limited
  2. 2. <ul><li>Background </li></ul><ul><li>Investment Objective </li></ul><ul><li>Investment Policy & Strategy </li></ul><ul><li>Investments of Epack </li></ul><ul><li>Adventuring into Africa </li></ul><ul><li>Performance </li></ul><ul><li>Conclusion </li></ul>Contents
  3. 3. <ul><li>The Epack concept was borne at presentation to a pre-retirement Association of Bank of Ghana (BoG) workers </li></ul><ul><li>Originally designed to enable 5 BoG staff to participate collectively in the Ghana stock market via an Investment Club . </li></ul><ul><li>Transformed from an investment club into an Investment Company in 1998 </li></ul><ul><li>Converted from an investment company into a Mutual Fund in 2002, managed by Databank . </li></ul>Background- How Did it Start?
  4. 4. <ul><li>Epa ¢ k is the 1st licensed equity mutual fund in Ghana </li></ul><ul><li>Epa ¢ k is listed on the highly reputed global mutual fund website, called the Morning Star </li></ul><ul><li>A pan-African Equity mutual Fund holding investments in 10 countries </li></ul>Background -Special Feats
  5. 5. <ul><li>Epa ¢ k is a long-term fund and therefore invests in the shares of listed companies </li></ul><ul><li>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). </li></ul>Background- Type of Fund?
  6. 6. Background- Growth of Shareholders 5 Over 65,000 Dec. 1996 Sept., 2007 Fig. 1
  7. 7. <ul><li>Objective of the Fund is to provide long-term capital growth via: </li></ul><ul><li>Investing in a diversified portfolio of listed shares in regulated markets in Ghana & Africa . </li></ul><ul><li>It’s mainly an equity fund - up to 80% of portfolio </li></ul>Investment Objective
  8. 8. <ul><li>Value investments philosophy-That’s identify and invest in firms which are expected to provide superior returns over a 5-year period. </li></ul><ul><li>Macro economic fundamentals are important but not enough </li></ul><ul><li>Quality/soundnes s of underlying business of stocks is vital to our investment decision making- ‘Bottom-up Approach’ </li></ul><ul><li>Valuation model is based on intrinsic value of stocks </li></ul>Investment Policy & Strategy
  9. 9. Investments of Epack Fig. 2
  10. 10. Investments of Epack Table: 1 * As at 28 Sept, 07 10,513.95 2,930.64 1,265.17 772.08 385.89 49.39 Epack Value (¢ million) 76% 85% 86% 95% 98% 96% Stock as % of total portfolio 7 7 7 7 6 6 No. of Industries 1 1 1 1 1 1 No. of markets 52% 56% 62% 67% 74% 73% Top 5 as % of total portfolio 13 12 13 12 10 11 No. of Stocks 1.26 0.40 0.18 0.22 0.16 0.02 Epack Value ($ million) ¢1,191.63 ¢701.37 ¢465.06 ¢388.5 ¢399.1 ¢179.50 Share Price 2002 2001 2000 1999 1998 1997
  11. 11. Investments of Epack Table: 2 * As at 28 Sept, 07 73.59 41.58 28.02 36.05 8.52 Epack Value ($ million ) 77% 77% 87% 76% 69% Stock as % of total portfolio 10 9 11 11 8 No. of Industries 10 9 7 6 2 No. of markets 24% 29 31% 28% 44% Top 5 as % of total portfolio 39 37 54 52 25 No. of Stocks 693,877 382,921 254,642 325,564 74,998 Epack Value (¢ million) ¢7,728 ¢5,707.76 ¢4,326.95 ¢4,536.91 ¢2,822.38 Share Price 2007* 2006 2005 2004 2003
  12. 12. Top 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
  13. 13. Fig. 4 Investments of Epack - Holdings in Africa Half Yr 07
  14. 14. Internationalisation- Epack’s Adventuring in Africa
  15. 15. Adventuring in Africa Fig. 5 Epack Presence
  16. 16. Adventuring in Africa <ul><li>Nigeria Experience </li></ul><ul><li>Foray into Nigeria in July 2003; </li></ul><ul><li>At that time, Nigeria was regarded as high risk; </li></ul><ul><li>It was seen to be off limits to foreigners; </li></ul><ul><li>Evidence showed that the NSE was an attractive investment; </li></ul><ul><li>Average dollar return between 1998 – 2003 was 7% compared to - 1% for the GSE; </li></ul>
  17. 17. Adventuring in Africa (Cont’d) <ul><li>Several companies traded at attractive valuations; </li></ul><ul><li>Main challenge was to locate a custodian; </li></ul><ul><li>Only one custodian at that time; </li></ul><ul><li>Choice of broker was also challenging; </li></ul><ul><li>Communication systems made T + 3 settlement very challenging; </li></ul>
  18. 18. Adventuring in Africa (Cont’d) Table: 5 193.48% 9,504,239 4,588,587 508,736 4,975,399 4yrs 208.87% 315,056 22,370 109,244 PZ Nigeria 1yr 168.51% 557,830 367,304 344,541 Cornerstone 1yr 7.08% 307,057 286,752 Ashakacem 2yrs 74.31% 55,824 2,451 33,432 Total 2yrs 33.83% 43,634 2,299 34,323 UAC-Prop 4yrs 252.18% 501,925 13,034 146,222 UACN 2yrs 51.89% 69,476 3,961 48,349 Nestle 2yrs 48.16% 87,781 5,395 62,891 7 UP 2yrs 67.04% 39,188 961 24,036 Cadbury 3yrs 144.92% 1,497,340 372,639 53,989 785,538 Zenith Bank 3yrs 112.16% 1,464,290 63,134 719,938 United Bank For Africa 4yrs 449.37% 2,922,574 112,455 552,456 Guaranty Trust 2yrs 0.95% 200,053 11,788 209,840 Union Bank 4yrs 240.44% 3,709,514 1,581,342 216,899 1,617,837 First Bank Holding Period Total Return Value as at 30/9/07 Sales Dividends Purchases (US$) Stock
  19. 19. Adventuring in Africa (Cont’d) <ul><li>Mauritius Experience </li></ul><ul><li>First investments made in October 2004; </li></ul><ul><li>Economy had shifted into a low growth phase; </li></ul><ul><li>Traditional economic drivers such as sugar and textiles were in decline; </li></ul><ul><li>Serious debate on how to re-establish high growth levels; </li></ul><ul><li>Tourism and financial sector identified as future growth pillars; </li></ul>
  20. 20. Adventuring in Africa (Cont’d) <ul><li>Move to develop a knowledge based economy with outsourcing at the centre; </li></ul><ul><li>Challenge of how to deploy redundant workforce; </li></ul><ul><li>Friendly foreign investor climate; </li></ul><ul><li>Low levels of liquidity; </li></ul><ul><li>Market seemed fairly valued on historical basis but cheap compared with other markets. </li></ul>
  21. 21. Adventuring in Africa (Cont’d) Table: 6 94.00% 7,396,776 1,380,727 554,346 4,810,212 Medine SR NMH Rogers SBM MCB Stock 1,719,960 169,348 234,601 310,597 912,329 1,463,376 Purchases (US$) 13,264 37,921 35,399 36,808 237,874 193,079 Dividends 422,862 957,865 Sales 1,499,754 335,227 764,037 2,005,226 2,792,533 Value as at 30/9/07 -12.03% 120.34% 95.34% 157.84% 145.87% 169.48% Total Return 1yr 3yrs 2yrs 3yrs 3yrs 3yrs Holding Period
  22. 22. Adventuring in Africa (Cont’d) <ul><li>Kenyan Experience </li></ul><ul><li>First investment made in March 2004; </li></ul><ul><li>Country was just coming out of a period of bad governance; </li></ul><ul><li>Kenya was emerging from a period of low growth rates; </li></ul><ul><li>Perceived to be corrupt; </li></ul><ul><li>Country was experiencing bad foreign press; </li></ul>
  23. 23. Adventuring in Africa (Cont’d) <ul><li>Very little foreign interest in the stock market; </li></ul><ul><li>Relatively well-developed capital markets; </li></ul><ul><li>Domestic interest in the stock market was beginning to pick-up; </li></ul><ul><li>Large capitalized stocks were fairly liquid. </li></ul>
  24. 24. Adventuring in Africa (Cont’d) Table: 7 148.19% 463,357 2,575,561 45,365 1,242,715 1yrs 138.10% 24,500 751,736 326,011 CMC 2yrs 236.71% 438,857 1,261,052 20,872 511,060 Kenya Airways 1yrs -14.52% 121,111 5,704 148,357 Standard Chartered 1yrs 65.87% 242,727 14,433 155,035 Barclays 1yrs 98.81% 198,935 4,356 102,252 EABL Holding Period Total Return Value as at 30/9/07 Sales Dividends Purchases (US$) Stock
  25. 25. Adventuring in Africa (Cont’d) <ul><li>Lessons </li></ul><ul><li>A well conceived investment strategy and philosophy can be applied both domestically and internationally; </li></ul><ul><li>It is possible to enhance returns and reduce risk through international diversification; </li></ul><ul><li>Mobilization of resources in Africa for Africans is possible and very feasible; </li></ul><ul><li>If it can be done in Ghana, it can be done in the other African Countries; </li></ul>
  26. 26. Adventuring in Africa (Cont’d) <ul><li>Nearly all the African Funds target non-African investors; </li></ul><ul><li>Need to make these opportunities available to Africans through the creation of collective investment industry for Africans; </li></ul>
  27. 27. Adventuring in Africa (Cont’d) <ul><li>Challenges </li></ul><ul><li>The need for greater co-operation between regulators and market operators in the development of the industry; </li></ul><ul><li>Existence of over-regulation in many markets; </li></ul><ul><li>Need to make it easier for capital to flow between African countries; </li></ul><ul><li>Resistance to opening up the capital account; </li></ul>
  28. 28. Adventuring in Africa (Cont’d) <ul><li>Pension reforms have increased the pool of capital; </li></ul><ul><li>Doubtful whether all of it can be effectively employed local; </li></ul><ul><li>Be careful that our enthusiasm does not lead to investment bubbles; </li></ul><ul><li>In the mid – 1990’s, Africa was referred to as the last frontier; </li></ul><ul><li>How is this frontier different from the frontier in the mid-1990’s? </li></ul>
  29. 29. How Has Epack Performed ?
  30. 30. <ul><li>Epa ¢ k has been the best performing mutual fund in Ghana and one of the best in Africa with a consistent 10 year record </li></ul><ul><li>Cumulative ROI since inception was 974% in $ terms as at December 2006 and 1,249% in $ terms as at July 31, 2007 </li></ul><ul><li>YTD ROI as at Sept 28, 2007: [ 32.2% in $ terms] </li></ul>Performance-ROI
  31. 31. Performance-ROI *ABRALL Returns is over 9 years Fig. 6
  32. 32. Performance-ROI *ABRALL Returns is over 9 years Fig. 7
  33. 33. Performance-ROI Epa ¢ k Yearly Returns Oct. 1996-Dec. 2006 Source: Databank Research Table: 8
  34. 34. Performance-ROI Source: Databank Research Fig. 8
  35. 35. <ul><li>Epa ¢ k started with only ¢ 250,000 [$27] in 1996. </li></ul><ul><li>Value as of Dec. 2006, was ¢ 382bn [$41.3m] </li></ul><ul><li>Value is as at 18 Oct., 07) ¢ 737bn [$78m] </li></ul>Performance – Value of Funds
  36. 36. Performance – Value of Funds Table. 9
  37. 37. <ul><li>Epa ¢ k has the biggest market share among all the 9 mutual funds in Ghana (both equity and money market funds) </li></ul><ul><li>Market share by value of funds under management as at Dec. 2006 was 57% (Databank Research) </li></ul><ul><li>Market share by size of customers as at Dec. 2006 was 63% (Databank Research) </li></ul>Performance – Market Share
  38. 38. <ul><li>The introduction of Epa ¢ k in Ghana in 1996 was an innovation in its own right: </li></ul><ul><li>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 </li></ul>Conclusion
  39. 39. <ul><li>Epa ¢ k has been the best performing mutual fund in Ghana and one of the best in Africa with a consistent 10 year record. </li></ul><ul><li>Cumulative returns on Epa ¢ k over the last decade has surpassed comparable instruments in the African market. </li></ul>Conclusion
  40. 40. <ul><li>Databank , is a leading brand in investment banking in Ghana/Africa- Credited with many firsts in the market such as: </li></ul><ul><li>First to develop a market index, the Databank Stock Index ( DSI) for the GSE; </li></ul><ul><li>First to introduce an equity mutual fund, Epack </li></ul><ul><li>First to introduce a money market mutual fund, Databank Mfund; </li></ul><ul><li>And recently voted as the Best Research Firm in Africa by Ai Index Series Awards in London. </li></ul>Conclusion
  41. 41. <ul><li>Databank , has leveraged on its: </li></ul><ul><li>Strategic Vision </li></ul><ul><li>Well-trained and experienced Human Resources </li></ul><ul><li>Sound Management Practices </li></ul><ul><li>International Networks </li></ul><ul><li>Capabilities & Commitment </li></ul><ul><li>To enable many Ghanaians and other nationals meet various financial goals. </li></ul><ul><li>It can be done for you too! </li></ul>Conclusion
  42. 42. Thanks for your Audience Epa ¢ k – Ghana’s # 1 Mutual Fund! www.databankgroup.com

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