october 31, 2011 - ceylon asset management€¦ · fitch rating ram ratings lanka is a domestic...
TRANSCRIPT
Trustee and Custodian of the Fund
October 31, 2011
“GDP forecasted to grow at 8% in 2012”
ADB
“…we believe that
Shangri-La will be able to assist in positioning the country as
a prime global tourist destination.”
Greg Dogan, President and CEO of Shangri-La International Hotel Management
“…looking for private equity or strategic investment opportunities in Sri Lanka.”
Mark Mobius, Chairman of Templeton Asset Management Ltd
Templeton Funds invested US$ 875 million in Sri Lankan Government Bonds in August 2009
“S & P upgraded the nation’s long-term foreign-currency sovereign credit rating
to B+ and the local-currency rating to BB-.”
Source: Bloomberg and Daily News
CEYLON INCOME FUND
SRI LANKA
01
Licensed byThe Securities and Exchange Commission of Sri Lanka
FUND MANAGER
CEYLON INCOME FUND
281, Union Place, Colombo 02, Sri Lanka.Tel: +94 11 739 4000 Fax: +94 11 739 4007
E-mail: [email protected]: www.ceylonam.com
THE OFFER AT A GLANCE
CEYLON INCOME FUND
Investment Plan
Nature of Fund Open ended fund offering units on a daily basis.
Issue of Units The Manager shall have an absolute discretion to accept or decline any application for Units.
Income Distribution Policy Net income will be distributed annually. **
Original Issue Price of Unit Rs. 10/-
Minimum Investment Local Investors - Rs. 100,000/-Foreign Investors – USD 10,000
Front End Fee NIL
Management Fee 0.5% per annum. The fee will be charged monthly.
Exit Fee NIL
Taxation All income and capital gains are Tax-free in the hands of unit holders.
Available for Foreign Investors? Yes
* Rated BBB- or better (Investment Grade)** Net return is calculated as the increase in Unit Net Asset Value (NAV)
Source: Central Bank of Sri Lanka, Ceylon Asset Management.
Apr
6%
9%
8%
Income Fund 1 Year TB Rate
11%
12%
14%
May Jun Aug Sep Oct Nov Dec Jan Feb MarJul
PERFORMANCE OF ALL FIXED INCOME UNIT TRUSTS IN SRI LANKA
Invest in rated interest bearing Fixed Income instruments: Corporate debt* instruments, Promissory Notes, deposits and Securities issued or guaranteed by a Bank, Treasury Bills and Bonds.
PERFORMANCE COMPARISON
CEYLON INCOME FUND
PERFORMANCE OF ALL FIXED INCOME UNIT TRUSTS IN SRI LANKA
PORTFOLIO ALLOCATION & RISK EXPOSURE
Performance period
Fund
A
A-
BBB+
BBB
Cash and Other
Total
14.93%
23.21%
38.67%
15.89%
7.30%
100.00%
52.66%
66.25%
17.86%
100.00%
–
49.74%
2011 (10 Months) FY 2010/2011 (12 Months)
31st Oct 2011 * 31st March 2011
Ceylon Income Fund
First Capital Wealth Fund
Eagle Income Fund
Eagle Gilt Edged Fund
NAMAL Income Fund
NAMAL Gilt Edged Fund
Ceybank Surakum Fund
Ceybank Gilt Edged Fund
10.30%
8.94%
8.66%
7.87%
7.17%
7.10%
6.56%
6.43%
12.39%
-
8.87%
8.70%
9.11%
10.48%
-
9.03%
Source: Unit Trust Association of Sri Lanka
Figures as of 31st October 2011
Rating Category Portfolio Allocation% Security Cover of the Portfolio
RATING AGENCIES IN SRI LANKA
An international credit rating agency based out of New York City and London. Fitch is one of the top three credit rating agencies. The company's ratings are used as a guide to investors as to which investments are most likely going to yield a return. It is based on factors such as how small an economic shift would be necessary to affect the standing of the bond, and how much, and what kind of debt is held by the company.
FITCH Rating
RAM Ratings Lanka is a domestic credit - rating agency registered under the Securities & Exchange Commission of Sri Lanka Act, No. 36 of 1987. RAM Ratings is recognized by the Central Bank of Sri Lanka to undertake mandatory credit rating of financial institutions and as an ECAI under Basel II. In addition, RAM Ratings Lanka is recognized by the Insurance Board of Sri Lanka to assign claims-paying ability ratings to insurance companies. In the regional arena, RAM Ratings Lanka is an ACRAA member.
RAM Rating
RATING DESCRIPTION
CEYLON INCOME FUND
Denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. Denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
Denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
Indicate that expectations of default risk are currently low. The capacity for payment of financial commit-ments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
Indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.
Indicate that material default risk is present, but a limited margin of safety remains. Financial commit-ments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.
Default is a real possibility.
Default of some kind appears probable.
AAA
AA
A
BBB
BB
B
CCC
CCSource: Fitch Rating
GENERAL INFORMATION ON THE FUND
CEYLON INCOME FUND
INVESTMENT RATIONALEThe objective of the Fund is to enable investors to earn a high interest
income in excess of Treasury Bill rates and inflation. In order to achieve
this objective, the Fund is invested in the following instruments:
a) Corporate debt Instruments of “Investment Grade” (BBB- or better)
b) Bank deposits and securities issued or guaranteed by banks
c) Government Securities
FEESThe annual management fee of 0.5% is charged monthly.
RISK FACTORSBeing invested in corporate debt instruments, the Fund is exposed to the
financial and credit risks of the individual company. However, by
investing in debt instruments of companies that are “Rated Investment
Grade” (BBB- or above), by Fitch or RAM Ratings, this risk is minimized
and diversified.
INCOME DISTRIBUTION POLICYDistributable income will be derived principally from interest earned and
realized gains from Fixed Income instruments. Net income will be
distributed annually after satisfying operating fees and expenses of the
Fund. All such income distributions are tax exempt. Investors have the
option to re-invest their annual distribution in units of the Funds.
TAXATIONAll capital gains and income distributions earned by unit holders are
exempt from tax. Accordingly, corporates can enjoy a 18% tax saving on
interest income. The information given is based on the latest amend-
ments to the Inland Revenue Act at the time of printing this document.
Investors who are in doubt as to their tax position should consult their tax
advisors on the implications of investing and disposing of units and the
receipt of Trust income distributions.
INVESTMENT RESTRICTIONSThe Manager will make investments within the parameters set out by the
Securities and Exchange Commission of Sri Lanka (SEC), directives and
guidelines issued by the SEC from time to time as well as the Unit Trust
Deed of the Fund. Unless permitted by the SEC, the Manager will not
make the following investments:
A. Any investment for the purpose of gaining management c
ontrol of a company.
B. Any investment in equity or foreign securities.
C. Any investment that involves the Trust in unlimited liability.
D. Leverage by borrowing against securities or buying on
margin.
E. Make loans or act as a guarantor or indemnify any person.
F. Underwrite securities
G. Investment in commodities
H. Investment in real estate.
Please refer to the Trust Deed for more information on investment restric-
tions.
MANAGER OF THE FUND
CEYLON INCOME FUND
INVESTMENT COMMITTEE
BOARD OF DIRECTORS
MBA, University of Colombo. Bachelor of Commerce Degree, University of Kelaniya. Certified Management Accountant (Australia). MD - Sri Lanka Insurance Corporation Ltd. Director, Lanka Hospitals Corporation PLC
Mohan de Alwis - (Chairman)
CFA, USA. A member of the Institute of Chartered Accountants in Australia (CA). Bachelor of Economics, Australia. Former CEO of MAS Investments. The Founder of Ceylon Asset Management.
Dulindra Fernando - (Managing Director)
B. Com (Hon) Degree, University of Kelaniya, Fellow Member of the Institute of CA of Sri Lanka. Fellow Member of the Certified Management Accountant of Sri Lanka. CEO, Litro Gas Lanka Ltd. Director, Sri Lanka Insurance Corporation Ltd.
Piyadasa Kudabalage
CFA, USA. Bachelor of Engineering, (Hons) in Civil Engineering, London. CEO of Aureos Advisers Ltd. (UK), an International Private Equity Firm.
Sivendran Vettivetpillai
MBA. Fellow of the Chartered Institute of Marketing, UK. Post Graduate Certificate in Sustainable Business at Cambridge University. Guest Lecturer on Strategic Corporate Sustainability at INSEAD-AMP, France and University of Deusto, Spain.
Ravi Fernando
Chartered Wealth Manager. A Graduate of the European Business School with a major in Finance and International Economics. Director and Research Fellow, the Asian Bond Market Forum (HK). Guest Lecturer, for the Graduate School of The People's Bank of China, China's Central Bank. Former Assc. Director, Investment Advisory Group of HSBC, Dubai. A guest commentator on Interna-tional Business TV and newspaper columns.
Michael Preiss
Michael Preiss
Dhanuka Liyanagamage
Dulindra Fernando
Chaminda Silva
CWA – Economic Advisor – Ceylon Asset Management
CFA – Senior Manager, Investments - Sri Lanka Insurance
CFA – Managing Director – Ceylon Asset Management
CFA – Head of Research of a Global Research Company
HOW TO INVEST IN UNIT TRUSTS
CEYLON INCOME FUND
MINIMUM INVESTMENTApplications for units could be for any amount subject to a minimum value of Rs. 5,000/- for local investors and USD 1,000 for foreign investors. The investment will be divided by the Manager's selling price to determine the number of units allotted.
PAYMENTYou may apply for units and make payment by cheque or bank draft crossed “A/C Payee Only” made payable to:“Ceylon Income Fund” and deposit in:A/C No:0041590-00-2 – Deutsche Bank OR A/C No:092-9600-00686 Sampath BankSWIFT Code: DEUTLKLXXXX
Ceylon Asset Management Company Limited does not accept cash. Cash deposits can be made directly into the Fund bank account. Please attach deposit slip to the application form.
ALLOTMENTSAllotment of units will be made after the monies being realised by Deutsche Bank or the application received at the office of Ceylon Asset Management Company Limited, whichever is later. Dealing is carried out daily. Where this falls on a holiday, the next market day is considered to be the dealing day.
VALUATION OF UNITSThe price at which investors may subscribe for or redeem units is calculated on each dealing day. In calculating a unit price, the Net Asset Value of the Fund is ascertained daily (after adjusting for charges) and divided by the number of units in issue.
WHO MAY INVEST1) Citizens of Sri Lanka, companies and institutions incorporated in Sri Lanka.2) Foreign citizens may invest via a Securities Investment Account (SIA) to enable repatriation* FOREIGN INVESTORS – SIA ACCOUNTForeign corporates and individuals may invest and repatriate capital and profits back in foreign currency by investing via a SIA Account with any bank. This process can be carried out on e-mail. Please contact [email protected] to help you open an SIA account on e-mail.
The Fund, managed by Ceylon Asset Management Company Limited (CAM) is regulated by the Securities and Exchange Commission of Sri Lanka (SEC) Act No. 36 of 1987 and amended by Act No. 26 of 1991 and Act No. 18 of 2003. The Trustee and Custodian of the Investment Fund is Deutsche Bank AG.
GENERAL INFORMATION
CEYLON INCOME FUND
DETAILS OF OTHER ADMINISTRATIVE AND PROFESSIONAL EXPENSES PAYABLE BY THE FUND
The Manager may choose to pay a commission to authorized agents out of their own funds. Such commission shall not be charged to the Trust.
Units can be redeemed with a written request, at the Manager’s buying
price published on each dealing day. Where a unit holder wishes to
redeem units which constitutes an aggregate of three percent (3%) or
more of the units of that fund, such holder shall give the Manager at
least one month's written notice in advance of his intention to redeem.
An application for redemption can be made at the office of the Manager,
by using the prescribed form. Payment of redemption proceeds will be
made by a bank cheque, crossed in favour of the unit holder, and such
cheque will be dispatched by post to the unit holder within 14 business
days from the date of receipt of the unit certificates for redemption.
The following fees will be charged at cost from the Fund:
-Trustee fee of a maximum of 0.20% on NAV - Legal fees-Custodian fee - Professional fees-Auditor fees - Taxes and duties -Brokerage fees - All other fees and charges incidental to the Fund
Any cost incurred in preparation and modifying the Unit Trust Deed.All professional fees (including disbursements) in connection with matters pertaining to the affairs of the Trust and all expenses incurred by the Trustees in effecting registration or safe custody of the documents of title to all investments held upon the Trust of the Deed.Any taxes, stamp duties, brokerages, commissions (not including commission to agents), bank charges and other duties payable on the Trust Deed or in connection with or arising from the establish-ment, execution, management or termination of the Trust.The stamp duty payable on the issue of certificates.Cost of printing and distributing dividend warrants, certificates and accounts and reports of the Trust.Any cost incurred in respect of meetings of unit holdersCosts incurred in preparing and publishing communications to unit holders.All other charges or fees expressly authorized by the Trust Deed or by Law, any or all of which may be discharged out of the Deposited Property of the Trust.
To redeem units registered in their names.To receive annual accounts, as at 31st December and the report of Auditors.To receive half yearly reports on the accounts and performance of the Fund.To participate and vote at a meeting of the unit holders. To transfer units on the payment of a Rs. 100/- as a fixed fee.
RIGHTS OF UNIT HOLDERS
Deutsche Bank AG and M/S PricewaterhouseCoopers have given written consent to include their names in the Information Memorandum.
CONSENT
For further information and clarifications of provisions appearing in the Information Memorandum, investors may inspect the Trust Deed of the Unit Trust and the Memorandum & Articles of Association of Ceylon Asset Management Company Limited free of charge at the business office.
The annual accounts will be prepared up to 31st December and will be
distributed amongst the unit holders within three months of the end of
the said date. Investors will be provided with half yearly reports on the
accounts and the performance of the Fund within three months of the
period covered. An interim report for the first half-yearly accounting
period shall not be prepared, in the case such period is less than six
months.
REPORTS AND ACCOUNTS
Ceylon Asset Management Company Limited alone shall have the
absolute, beneficial and unfettered right to exercise votes attached or
pertaining to any shares, units or other securities.
VOTING RIGHTS
REDEMPTION OF UNITS
CEYLON INCOME FUND
The Managers may, with the approval of the Trustee and the Securities
and Exchange Commission of Sri Lanka, suspend the dealings during:DISCLAIMER & DISCLOSURE
Please note that prices, valuations and rates as indicated in this
document are valid as at September 30th, 2011 and are subject to
change on a daily basis. Investors are advised to refer the newspapers,
contact Ceylon Asset Management or log on to www.ceylonam.com for
up-to-date values.
The Unit Trust is regulated by the
SECURITIES AND EXCHANGE COMMISSION OF SRI
LANKA
Act No. 36 of 1987 and amended by Act No. 26 of 1991 and Act No. 18
of 2003
SUSPENSION OF DEALINGS
Any period when the dealings of the Colombo Stock Exchange is
restricted or suspended.
The existence of any state of affairs during any period, which, in the
opinion of the Managers, would be detrimental to the interests of the
unit holders.
Any period during which there is a breakdown of communication in
determining the prices of their investments.
Such suspension shall take effect immediately upon declaration
thereof by the Managers subject to the provisions of the Trust Deed,
and shall terminate, once the Manager is satisfied that the conditions
giving rise to such suspension shall have ceased to exist.
CEYLON INCOME FUND
This document does not constitute an offer or solicitation to anyone in
any jurisdiction in which such offer or solicitation is not authorized or to
any person to whom it is unlawful to make such offer or solicitation and
may be used only in connection with this offering of units to which it
relates by distributors as contemplated herein.
“The Board of Directors of the Trustee hereby declare that it will carry out
the transactions with the Managing Company at arm’s length basis and
on terms which are best available for the Fund, as well as act, at all
times, in the best interests of the fund’s unit holders and also that the
requirements of the Guidelines have been compiled with. The Trustee
further certify that it has read and agrees with the representations
contained herein.”
Director
On behalf of the Board of Directors of the Trustee
The Board of Directors of the Managing Company hereby declare that it
will carry out the transactions with the Trustee at arm’s length basis and
on terms which are best available for the Fund, as well as act, at all
times, in the best interests of the fund's unit holders and also that the
requirements of the Guidelines have been compiled with.
This Information Memorandum has been seen and approved by the
Directors of the Managing Company and they collectively and individu-
ally accept full responsibility for the accuracy of the information given
and confirm that, after making all reasonable inquiries to the best of
their knowledge and belief, there are no other facts, the omission of
which, would make any statements herein misleading”
Director Director
On behalf of the Board of Directors of the Managing Company
FUND MANAGER & COMPANY REGISTRARCeylon Asset Management Company Limited281, Union Place, Colombo 2, Sri Lanka
Company Registration No: P B 995
A Venture between Sri Lanka Insurance Corporation Ltd. (25%) and
Ceylon Capital Trust (Pvt) Ltd.(75%).
AUDITORS PriceWaterHouseCoopers
100, Braybrook Place, Colombo 2, Sri Lanka
TRUSTEE & CUSTODIAN Deutsche Bank AGTrust & Securities Services
Colombo Branch
86, Galle Road, Colombo 3, Sri Lanka.
Deutsche Bank, Sri Lankan Branch is a fully owned Branch office of
Deutsche Bank, Frankfurt
LAWYERSNithya Partners
Attorneys at Law
97A, Galle Road, Colombo 3, Sri Lanka
KEY INFORMATION
CEYLON INCOME FUND
The Ceylon Income Fund recorded an after-tax net return of 12.39% to
emerge as the best performing fixed income fund in Sri Lanka for the
financial year ending 31/03/2011. It is also the best performing fund of
all Unit Trusts in Sri Lanka during the 10 months to October 31, 2011*
while being amongst the lowest in fees charged.
On the 18th of August 2011 Sri Lanka lifted restrictions on foreign
investment into Fixed Income Unit Trusts (Gazette No. 1719/22). Now
foreigners are allowed to invest freely in any Unit Trust via SIA
(Securities Investment Account).
The Economic Advisor of Ceylon Asset Management Mr. Michael Preiss
says, “The oversubscription of Sri Lanka’s USD 1 billion sovereign bond
issue reveals strong investor interest in Sri Lanka fixed income returns,
which will certainly extend to the Ceylon Income Fund. The attractive
yields of ‘Rated’ Finance companies, regulated by the Central Bank of
Sri Lanka, will attract a large quantum of foreign capital via Unit Trusts
due to improving risk ratings, a stable currency and healthy growth.”
“The European Central Bank (ECB) has reduced their interest rates to
1.25% to boost the struggling European Union (EU) economy as
investors flee Italy and Greece. The US Treasury bill rates pay only
0.11%. What was ‘risky’ yesterday is not risky today and vice versa. The
risk in the west is rising while risk in Asia is declining.”
(*source-UTA Performance Reports, Please note that past
performances are not indicative of future performances)
Ceylon Income Fund is Top Performer in 2011Sunday Island – 20th November 2011
“The oversubscription of Sri Lanka’s USD 1 billion
sovereign bond issue reveals strong investor
interest in Sri Lanka fixed income returns”
(Michael Preiss)
Attracts Foreign and Corporate investors