The Imara Zimbabwe Fund Segregated Portfolio Monthly Report (May 2014)


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The Imara Zimbabwe Fund Segregated Portfolio Monthly Report (May 2014)

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The Imara Zimbabwe Fund Segregated Portfolio Monthly Report (May 2014)

  1. 1. Imara Zimbabwe Fund Segregated Portfolio Monthly Zimbabwe May 2014 Imara Asset Management Limited Gross/Net NAV: US$11.38 (-4.2%) as at 30/4/14 The Fund had another disappointing month, especially as we were down by 4.2% compared to a 1% fall by the Index. The reason for the under-performance can be attributed to some of our smaller stocks falling substantially on very low volumes, however we expect these to rebound on a recovery. Overall volumes in the market were farily respectable, however this was largely due to a number of “special bargains” that were crossed through the stock market; for example, a further 5% of Seed Co was bought by Vilmorin from Cottco. During the sell-off we have tried to buy stocks on behalf of investors who wished to take advantage of the lower levels, but sadly with little luck. In our view, this simply highlights the fact that investors have been unwilling to sell at these depressed levels, with the exception perhaps of retail investors with small blocks of shares to sell. As we mentioned last month, there has been no real negative news announced to unsettle investors but, the lack of both business activity and any ‘feel good’ factor has not helped. The long Easter holidays also started this month, which usually leads to a natural lowering of volumes. In reality, the news has been rather more positive: at the celebrations for Zimbabwe’s 34th anniversary of its Independence, President Mugabe went out of his way in his speech, at the National Sports Stadium, to stress that the indigenisation policy was ‘flexible’. This is very significant news as, up to now, he has been vociferous in his views that foreigners should own less than 51% of a business and indeed, his entire election manifesto was based upon “local empowerment”. Soon after the speech, a number of Ministers and Deputy Ministers went on to reiterate this statement, including the Ministry of Finance and also Foreign Affairs. This comes at a time when the country has been actively seeking foreign credit lines to assist in the implementation of its economic policies. These have not proved forthcoming, even from the likes of the Chinese, whom Zimbabwe has been actively courting. It also comes soon after the IMF review meeting which we mentioned in our last report. The real issue remains that Zimbabwe has outstanding debt of around US$6bn and, until that amount is subject to debt write-offs or debt relief, the country will not be able to access any significant new credit lines. In addition, as we have seen elsewhere in the World, and especially in Africa over recent decades, debt write-offs require evidence of a commitment to sound economic policies. Zambia is a case in point: it saw the bulk of its US$7bn of debt written off by the multi-lateral agencies a decade ago. Last month Zambia issued its second Eurobond for US$1bn, which followed a US$750mn bond issue in 2012. It could be then, that the penny is finally dropping within the Zanu-PF Government, that action needs to be taken to address economic policy and, in particular, to make Zimbabwe a more attractive country with which to do business. Adopting the multi-currency system or, in reality the US Dollar, on the one hand, imposes major constraints on the Government with regards policy but, on the other, is a huge attraction for foreign investors who have no currency risk. While there have been on-going rumours that Zimbabwe would reintroduce its own currency to assist, for example, with the payment of civil service salaries, the reality is that to do so would be virtually impossible in practice. All the Government can do, therefore, is to create an “enabling” environment for the private sector as well as foreign investors, to invest and do business. This Government will need to go that much further however, to re-build trust - something that the previous Unity Government had a certain amount of from the very start or, at least, it had the benefit of doubt. A reduction in politicised rhetoric with regards to indigenisation is therefore a major step in the right direction. The on-going discussions between the mining community and the various relevant Ministries - such as Finance, Mining and Environment – have, meanwhile, yet to lead to any concrete policy measures but, at least the negotiations are in place. The World Bank’s recent survey that Zimbabwe had one of the worst legal and regulatory environments, but one of the better operating environments, should help to focus their minds! Historic Performance (with net dividends reinvested): Change (%) Fund MSCI-World 1 Month -4.2 1.0 3 Months -14.9 6.2 Year to Date -16.4 2.3 Compound Annual Return (%) 1 year -13.8 16.6 3 years -2.3 9.1 5 years 7.2 16.0
  2. 2. Disclaimer: The purpose of this fact sheet is to provide summary information and does not constitute a recommendation to buy or sell shares in the Fund. Any decision to buy and sell shares should be made after seeking appropriate professional advice and on the basis of the Fund’s Prospectus, available from the Administrators to investors in certain jurisdictions where the fund has been authorised. The Imara Funds can only be marketed to ‘Eligible investors’ as defined in the Prospectus. The Fund is not marketed or sold in any jurisdiction that it is not legally permitted. Persons in receipt of the information contained herein are required to inform themselves about and observe such restrictions. Past performance is not necessarily a guide to future performance. The value of investments and the income from them can fluctuate and are not guaranteed. The return on assets invested by a member of the Imara Group may go down as well as up and there is no guarantee or assurance as to performance. The views expressed are as at the date hereof and are subject to change. They do not constitute investment or any advice. This report is produced by Imara Asset Management Limited (BVI). Investment Philosophy: We seek growth companies with a view to achieving absolute returns over the long-run. The fund is long-only with no limit on the cash position. We think the best way to achieve absolute returns in a long-only fund is to: Look for companies with:  A good business model  Earnings and cash flow that are growing quickly Which are cheap i.e.:  Trade at a discount to intrinsic/replacement value and are on a low PE Which are exposed to the main investment themes of:  Industrialization, Structural Reform, Rising Domestic Savings Contact Details: South Africa - Dave Eliot E-mail: Zimbabwe – John Legat E-mail: Jonathan Chew E-mail: United Kingdom / Europe – Patrick German Email: Mauritius – Rajeev Sookur (Chief Administration Manager) E-mail: Administrator: Cim Fund Services Ltd E-mail: Website: Fund Details: Fund Manager: Imara Asset Management Limited (BVI) Custodian: Standard Chartered Bank (Mauritius) Limited Administrator: Cim Fund Services Ltd Management Fee: 1.5% p.a plus 15% incentive fee Valuation Dates: Monthly Dealing Dates: Month End ISIN: VGG472631016 CUSIP: G47263101 Bloomberg: IMARAZF VI Inception: February 2007 Top Five Holdings: Delta Corporation Ltd 13.3% British American Tobacco Zimbabwe 12.0% Seed Company 9.4% Econet Wireless Holdings Ltd 9.2% Innscor Africa Limited 7.9% NAV US$16.4m (2/5/14) Fund Performance Sector Breakdown Geographical breakdown Change (%) Feb 2007 2008 2009 2009 post dollari- sation 2010 2011 2012 2013 YTD Fund 5.1 -44.6 84.7 196.1 2 0.4 -1.2 25.2 -16.4 Industrial Index N/A N/A N/A 159.5 -0.5 -3.6 4.5 32.6 -14.5 Mining Index N/A N/A N/A 46.9 8 -49.8 -35.5 -29.7 -35.3 MSCI EM (Net) 41.7 -53.3 102.2 102.2 18.9 -18.4 18.2 -2.6 -0.1