Pyramid Unit Trust (PUT), managed by Eagle NDB Fund Management Co., Ltd., saw a ‘net increase in unit holder’s funds due to investment activities,’ from Rs 2.41 million to Rs 6.676 million for the six month period ended September 30 of last year, as compared with the corresponding period in 2000, data on the Fund’s unaudited accounts for the period under review showed.

PUT’s net income during this period increased from Rs 4.822 million to Rs 9.244 million, while net losses on investments declined from Rs 5.466 million to Rs 3.137 million. The Fund’s total investments during this period declined from Rs 169.3 million to Rs 151 million.

Meanwhile, PUT’s investments in equity during this period decreased from Rs 96.22 million to Rs 59.66 million, while its investments in fixed income grew from Rs 28.76 million to Rs 79.07 million. Its investments in ‘treasury bills under repurchase agreements’ declined from Rs 44.33 million to Rs 12.31 million.

The Fund’s capital account during the period under review declined from Rs 167 million to Rs 153.8 million, chiefly because of the increase in net realised losses from Rs 145.7 million to Rs 178.8 million.

Eagle NDB Fund’s director C. Jayaratne in his manager’s report said that the dismal performance of the Colombo Stock Exchange (CSE) continued with the All Share Price Index (ASPI) plunging a further 20 points to close at 403.6 for the six months ended September 30 of last year.

This was a 4.5% decline during the period under review. Both foreign and local investors could not be lured into the market although some stocks were yielding a dividend yield of more than 10% and were trading at PER of less than five times.

This was mainly due to the dampening of investor sentiment towards which a host of factors such as poor economic growth, political uncertainty and the global recessionary environment contributed. ‘As a result, the average turnover levels at the CSE continued to decline, from Rs 45 million per day to Rs 32 million per day with foreigners being net sellers, says Jayaratne.

He also said that they believed that being aggressive in asset allocating in favour of fixed income investments had contributed significantly in protecting the funds value on a downward equity market.

PUT’s total investments in ‘Fixed Income Investments’ comprised Rs 79.073 million or 51.4% of its total net assets. The breakdown in the Fund’s ‘Fixed Income Investments’ comprised Rs 60.34 million worth of treasury bonds comprising 39.22% of its net assets.

And in Rs 1.565 million worth of HNB debentures comprising 1.02% of its net assets.

Rs 3.7 million worth of Commercial Bank debentures or 2.41% of its net assets and Rs 456,120 worth of Riverina Hotels debentures equivalent to 0.3% of its net assets. Meanwhile, its investments in ‘Commercial Papers’ comprised Rs 8.452 million worth of treasury bills or 5.49% of its total net assets and Rs 4.563 million in Standard Chartered Grindlays, or 2.97% of its total net assets.

Jayaratne in his report further said that PUT continues to perform well, compared with the ASPI. ‘During the period under review, the fund has out-performed the ASPI by nearly 8%, giving a positive return of 4.26%. when the market declined by 4.72%.’

The main reason for this performance can be attributed to the decision to invest in government bonds which yielded capital gains, said Jayaratne. The over-performance is especially significant over the last year, when the fund outperformed the ASPI return by over 15%, he says.

With regard to the ‘Investment Outlook,’ Jayaratne says that though the present economic environment is weak, the investment environment over the medium and long term is expected to be positive. ‘Your fund would continue to accumulate equity exposures on selected blue chip companies that we believe will perform well in the case of a market upturn,’ he says.

Hence, the exposures to equity will be increased and the exposure to fixed income securities will be reduced to finance the purchase of shares, Jayaratne says. But he also says that as volatility is a characteristic of equity markets, ‘your fund would continue to have an exposure to fixed income investments, which would generate a steady income for the fund.’

He further says that the market price to earnings ratio of the CSE as at September 30 was 4.8 which was one of the lowest in recent years. ‘Many of the blue-chip stocks show unprecedented value at these price levels.’ Although the price performance of these stocks has not been satisfactory over the past year, the fund continued to remain exposed to these stocks, as the long term view of their price performance is favourable, he says.

Meanwhile, PUT’s total equity investment portfolio during the period under review comprised 38.79% of its total net assets valued at Rs 59.66 million (total market value of quoted equity investments), as against Rs 96.22 million or 57.62% of total net assets during the commensurate period in 2000.

The breakdown in the Fund’s equity investment portfolio comprised ‘Banks, Finance & Insurance’ (17.47%); ‘Diversified Holdings’ (12.73%); ‘Hotels & Travels’ (1.32%); ‘Manufacturing’ (4.91%); ‘Plantations’ (1.46%); ‘Footwear & Textiles’ (0.65%) and in ‘Unquoted Investments,’ (0.25%).

Investments in Banks, Finance & Insurance, comprised 183,860 shares in Commercial Bank with a market value of Rs 14.43 million; 64,896 shares in DFCC Bank with a market value of Rs 3.894 million; 34,661 shares in HNB with a market value of Rs 1.144 million.

215,000 shares in National Development Bank with a market value of Rs 6.45 million and 110,000 values of Nations Trust Bank with a market value of Rs 962,500. Investments in ‘Diversified Holdings’ comprised 69,900 shares in Aitken Spence and Company Ltd valued at Rs 5.767 million; Hayleys, 69,100 shares valued at Rs 3.731 million and John Keells Holdings, 317,288 shares valued at Rs 10.07 million.

‘Hotels & Travels,’ 217,100 shares in Asian Hotels Corporation valued at Rs 597,025 and 84,000 shares in Aitken Spence Hotels Holdings Ltd valued at Rs 1.428 million. In the ‘Manufacturing’ sector, 102,100 shares in Caltex valued at Rs 5.564 million; 80,700 shares in Printcare valued at Rs 1.231 million and 150,000 shares in Pelawatte valued at Rs 750,000.

In the ‘Plantations’ sector, 64,700 shares in Balangoda Plantations valued at Rs 921,975 and 78,000 shares in Maskeliya Plantations worth Rs 1.326 million. In the ‘Footwear & Textiles’ sector, 142,500 shares in Kuruwita Textile Mills valued at Rs 997,500 and in ‘Unquoted Investments,’ 39,080 shares in NDB Bank Ltd valued at Rs 390,800. (PA)