Citadele Ukrainian Equity Fund January 2011
Content Ukraine, Highlights…………………………………….………………………….………..................3 Ukrainian macroeconomics..…………………………………………………..…....………..…...4 Encouraging results 2010 ..…….…………………..…………..………….…………..……4 Ukrainian Equity market: A rapid improvement is clearly visible……………………...….……7 Citadele Ukrainian Equity Fund …………………………………..………………….……..….…9 Objective and investment strategy ….……....……………………………..............……..9 Investment process ………....……………………………………...........................…….10 Fund characteristics and performance…....……………………………….............…….11 Peer comparison …....……………………………………....................................….…..13 Management team …....……………………………………..........................................……..14
Citadele Asset Management ………………………………………………………………….....…15 Latvia and Ukraine, Productive partnership …………………………………………………....16 Citadele track record in Ukraine, Funds under management ……………………………...…17 Contact details ….……….........................…….................................................................…18 Important information ..…………………..……………………………………………………......19
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Ukraine Country highlights Ukraine is the 2nd largest country in Europe Territory 603.7 thousand km2 Population 46.1 million people Possesses both rich farmlands as well as a well-developed industrial base
The world's #1 sunflower oil exporter and #3 grain exporter* World’s #8 producer of steel Relatively rich in natural resources, particularly in mineral deposits #1 by proven manganese ore reserves (30% of world reserves) #3 by proven iron ore reserves #7 by proven coal reserves
The best in the world in stock market growth in the past decade Political stability expected post Presidential elections
* in 2009/2010 Marketing Year
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Ukrainian macroeconomics Encouraging results 2010
10% 5% 0% -5% -10% -15%
2010*
4Q10*
3Q10
2Q10
1Q10
2009
4Q09
3Q09
2Q09
2008
1Q09
4Q08
3Q08
2Q08
2007
1Q08
PPI
CPI
40%
20%
30%
0%
20%
* NBU Estimates Source: Ukrstat, NBU, CAM Estimates
10% 0%
Dec-10
May-10
Sep-09
Jan-09
May-08
Sep-07
-10%
Jan-07
Metallurgy Machine-building Chemicals Industrial Output
Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10
-60%
4Q07
50%
40%
-40%
3Q07
Price indexes’ dynamics, % yoy
Industrial output performance, % yoy
-20%
2Q07
-20% -25%
60%
Real GDP gGrowth, % yoy
15%
1Q07
Ukraine’s real GDP advanced by nearly 4.5%* yoy in 2010, one of the highest growth rates in the region Consumer inflation made a welcome return to singledigit growth. End-2010 CPI stood at 9.1% yoy, the lowest level since 2003 IP rose by 11.0% yoy in 2010, driven by export-oriented machine-building, metallurgical and chemical sectors
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Ukrainian macroeconomics Encouraging 2010 results Ukraine’s trade and current account balance dynamics, USD b
2010 C/A gap of $2.6b (1.9% of GDP) was fully covered by the F/A surplus of $7.7b Recovery heavily reliant on investment flows. Investment environment improving
Merch. Trade Balance Income Balance C /A balance
3 2
Services Trade Balance C urrent Transfers
1.0 0.5
1
Political stability post Presidential elections Investment inflows related to the Euro-2012 football championship Increased debt capital inflows
End-2010 NBU reserves reached $34.6b, up 30.5% yoy, primarily due to IMF financing and government external borrowings 2010 average USD/UAH exchange rate declined by 2% yoy to 7.95
-0.531
-13.726
5.096
4
C/A Balance, USD b
-5.272
-12.763
-1.732
-2.558
3
F/A Balance, USD b
5.709
12.232
-11.994
7.654
2
5.03
5.30
8.11
7.95
-2.2 2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
-2.0 -2.5
4Q10
Ukraine’s financial account statistics, USD b
0.437
USD/UAH (market average)
-1.5
1Q09
Balance of Payments, USD b
34.576
-1.0
-0.9
-5
2010
26.505
-0.5 -0.8
-4
2009
31.543
-0.2
-0.6
-3
2008
32.479
0.0 0.0
-0.1
-2
2007
Gross Int. Reserves, USD b
0.5
0 -1
1.5
Net FDI Net Debt C apital Flows
5
4.6
Other C apital F/A Balance
5 4
2.9
3 2
1
0.8
0
0
-1
-0.7
-1.9
-2
-1
-0.7
-2
-3 -4 -5
1
-3 -4
-4.6 1Q09
-4.9 2Q09
3Q09
-5 4Q09
1Q10
2Q10
3Q10
4Q10
Source: Ukrstat, NBU, CAM Estimates
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Ukrainian macroeconomics Encouraging 2010 results Ukraine's general government deficit , % of GDP*
In the frame of the cooperation with the IMF, Ukraine undertook to improve its fiscal position. In 2010, general government deficit narrowed to est. 6.5% of GDP, from 8.7% in 2009 Ukraine’s public debt grew by 36% yoy in 2010 to $54.3b. This equals to 39% of 2010E GDP, which is in line with regional peers average
0% -2%
-1.4% -2.3%
-2.0% -3.1%
-4% -6%
-6.5% -8% -8.7%
-10% 2005
Ukraine’s public debt dynamics, USD b 60
60%
Domestic debt External debt % of GDP
50
50%
40
40%
30
30%
20
20%
10
10%
2006
2007
2008
2009
2010E
Public sector debt: Ukraine vs. regional peers, % of GDP** 80% 2009
70%
2010E
2010E Peers Avg
60% 50% 40% 30% 20%
* inc. Naftogaz, excl. bank recap; ** IMF Estimates Source: Ukrstat, MinFin, World Bank, IMF, CAM Estimates
Hungary
Poland
Georgia
Armenia
2010
Turkey
2009
Lithuania
2008
Ukraine
2007
Romania
2006
Moldova
2005
Belarus
2004
0%
Kazakhstan
0%
Russia
0
10%
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Ukrainian equity market: A rapid improvement is clearly visible
Ukrainian exchange (UX) Performance in 2010*
Ukrainian equity market surged by 68% in 2010, becoming the 4th best-performing market globally Ukrainian stocks listed on local and foreign bourses surged by 104% yoy to $6.9b in 2010 Forecasted high earnings growth by the traded companies
2600 2400 2200 2000 1800 1600 1400 Jan-10
Ukrainian equity market: Average daily turnover, USD m 50
Domestic markets (PFTS+UX)
40
* in UAH terms Source: UX, PFTS, Bloomberg, CAM Estimates
Dec-10
Ukrainian equity market 2010: Turnover by platform
10
19 17
Dec-10
8
16 15
Oct-10
10
Sep-10
10
17
15
Aug-10
11
Jul-10
12
Jun-10
10
15
Nov-10
21
May-10
Mar-10
5
Feb-10
0
11 5
Jan-10
10
16
Oct-10
Other 20%
21
Apr-10
20
Aug-10
31
27 22
May-10
Foreign markets
33
30
Mar-10
London Stock Exchange 47%
Ukrainian Exchange 25% Warsaw Stock Exchange 8%
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Ukrainian equity market: A rapid improvement is clearly visible The launch of an internet trading and futures trading spurred the domestic market activity Reviving IPOs contribute to liquidity improvement Despite impressive growth in 2009-2010, Ukraine’s local market is still trading 55% below its midJanuary 2008 peak level due to depreciated national currency
UX vs. Frontier and emerging market indices (USD terms) 140%
120%
500
UX+PFTS*
Repo (UX)
MSCI EM EE
MSCI FM CEE+CIS
UX
100% 80%
60% 40% 20%
0% Jan-08
Equities trading volumes on local bourses, USD m
RTSI
Aug-08
Mar-09
300
May-10
Dec-10
Proceeds from public offerings by Ukrainian companies in 2010
Futures (UX)
400
Oct-09
Company
Industry
Offer Type
Bourse
Proceeds, USD m
Agroton
Farming
IPO
WSE
54
Coal
IPO
WSE
31
Kernel
Food Processing
Placing
WSE
80
MHP
Food Processing
Placing
LSE
165
0
* excluding Repo Source: UX, PFTS, RTS, MSCI, Reuters, CAM Estimates
Dec-10
Sadovaya Group
Nov-10
100
Oct-10
78
Sep-10
WSE
Aug-10
IPO
Jul-10
Food Processing
Jun-10
Milkiland
May-10
208
Apr-10
LSE
Mar-10
IPO
Feb-10
Food Processing
Jan-10
Avangard
200
Total
616
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Citadele Ukrainian Equity Fund Objective and investment strategy
Fund’s Objective The Fund aims to achieve a long-term capital growth through investments mainly in listed equity shares of Ukrainian companies or international companies having significant exposure to Ukraine
Investment Strategy The Fund invests in companies, which are fundamentally undervalued, with significant underlying growth potential
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Citadele Ukrainian Equity Fund Investment process
Bottom-up stock selection, based on a fundamental analysis of the companies Stock selection criteria: Quality companies Potential for strong growth Adequate valuations Liquidity of shares Positive industry outlook
Sources of information: Citadele Asset Management Ukraine provides on-the-spot expertise Meetings and discussions with the management of the companies Financial reports and news flows Third-party research
We periodically review the portfolio breakdown by industry, based on our view on overall trends in the industry
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Citadele Ukrainian Equity Fund Fund characteristics and performance* Fund characteristics Type of the Fund Compliance status Domicile Currency Benchmark Management Fee Load fee Fund Size Investment Manager Custodian Listings Inception date ISIN Liquidity
Indexed performance since inception Open-ended UCITS III Latvia EUR PFTS Index 2.5% per annum up to 2.5% 1.37 mln Citadele Asset Management Citadele banka OMX Riga Stock Exchange November 2007 LV0000400422 Daily
100 90 80 Fund
70 60 50 40 30
20 10
Nov-07
Jun-08
Feb-09
Performance YTD 1 month 3 months 6 months 1 year Since Inception Annualized Since Inception ***
* as at 31/01/11 ** PFTS Index *** annualized performance is calculated, using ACT/360 method
PFTS index (EUR)
Oct-09
Jun-10
Jan-11
31/01/11 1.57% 1.57% 25.10% 13.29% 35.56% -67.60% -29.41% 11
Citadele Ukrainian Equity Fund Fund characteristics and performance* Ratios
1 Year
Volatility
30.25%
Alpha
-0.13%
Daily Tracking Error
30.50%
Sharpe Ratio ** Information Ratio Maximum Drawdown ***
1.15 -1.11 18.98%
Top 10 holdings Motor-Sich
9.07%
Ferrexpo
8.26%
Ukranafta
6.48%
Mriya Agro
5.37%
Agroton Kernel
5.34%
North Ore Mining And Processing Enterprise MHP
4.92%
Astarta
4.69%
Stahanovskyy vagonobudinyy zavod
4.57%
5.20% 4.72%
TOTAL:
Breakdown by instruments Equities
58.62%
Breakdown by sectors 93.47%
Consumer staples
25.52% 22.66%
Materials Cash
6.53%
Energy
15.97%
Industrials
15.23%
Utilities
8.01%
Financials * Data as at 31/01/11 ** LIBOR EUR 3M *** Max Drawdown is calculated as the max drop of 30D roll return
Consumer discretionary
5.31% 0.77%
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Citadele Ukrainian Equity Fund Peer comparison 120 Berenberg-Emerging-Ukraine-Universal-Fonds FIM Ukraine Sampo Funds - Danske Ukraina Parex Ukrainian Equity Fund
100 80
60 40
20 0 Nov-07
Feb-08
May-08
Aug-08
Nov-08
Feb-09
May-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
3 months
since November 2007
Citadele Ukrainian Equity Fund
15.16%
-68.10%
Berenberg-Emerging-Ukraine Universal Funds
3.79%
-78.09%
FIM Ukraine
5.17%
-84.00%
Sampo Funds-Danske Ukraine
0.00%
-70.74%
Dec-10
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Citadele Asset Management Ukraine Portfolio management team Antons Lubenko, Portfolio Manager Antons Lubenko is responsible for security selection in Russia and Ukraine. Mr. Lubenko rejoined the Fund management team in January 2010. He has served as the manager of Parex Russian Equity for 2 years, until May 2009 when he joined the Bank’s brokerage to ensure efficient trade execution for CAM. Mr.Lubenko has been part of Parex / Citadele Group since 2005. During this time he has worked in capacities as broker, trading the region’s equities, and fund manager. Thus, he is familiar with the Russian and CIS equity markets and has established an extensive contact base in the region. Mr. Lubenko holds MSc in Economics from the University of Latvia.
Aleksey Dudarenko, Portfolio Manager Mr. Aleksey Dudarenko is responsible for daily management of the fund. As a member of Investment Committee he is responsible for decision on the fund’s allocation and securities’ selection. Aleksey joined Citadele (former Parex) in 2007 as an analyst for Citadele Asset Management Ukraine. He is a certified specialist in asset management by Ukrainian State Stock Market and Securities Commission. He holds a Master’s degree in Economics from Dnepropetrovsk National University and Bachelors degree in Law from Dnepropetrovsk National University. Prior to his employment by Ctadele, he worked at Ukrainian consulting and asset management companies as an economic consultant and portfolio manager.
Lidiya Mudra, Analyst Ms Lidiya Mudra, a financial analyst, joined Citadele Asset Management (former Parex Asset Management) Ukraine in January 2008. Prior to joining the company she worked at UFC Capital as an equity research analyst. She holds a Bachelor's degree in International Relations and a Diploma in International Information with a qualification of the analyst in international affairs from Khmelnytskyi National University.
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Citadele Asset Management
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Citadele Asset Management: Latvia and Ukraine Productive partnership Citadele Asset Management Latvia – the leading investment specialist and wealth management service provider in the Baltics Unique investment expertise in the Baltic States, CEE and CIS markets Broad client base: HNW clients, corporate, institutional investors, etc. All asset classes represented by in-house managed products plus third-party funds distribution (HSBC,Templeton, AVIVA, PIMCO etc.) Citadele Asset Management Ukraine – A wholly owned subsidiary of Citadele Asset Management (Latvia), founded in 2004 AUM more than USD 80 mln Funds under the management and administration of Citadele Asset Management Ukraine
Investment funds for wide range of investors Investment funds for private investors
Pension funds
Closed-end
“Citadele Ukrainian Real Estate fund”
Open-end
“Citadele Ukrainian Balanced Fund”
Open-end
“Citadele Ukrainian Bond Fund”
Closed-end
“Private Project Development”
Closed-end
“Kirsh Invest”
Open private
“Universal”
Open private
“Khreschatyk”
Open private
“Ukrainian pension union”
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Citadele track record in Ukraine Funds under management Parex Ukrainian Balanced Fund
Citadele Ukrainian Balanced Fund Indexed performance since inception
Incepted in January 2006 Investment policy: long-term capital growth Balanced investment approach: investing into the wide range of equities (up to 30%) and fixed income securities in order to minimize short-term value fluctuations
240 220
Parex Ukrainian Bond Fund
200
Incepted in December 2005 Investment policy: long-term capital growth at the minimum risk level Performance since inception 57.00%
180 160
Parex Ukrainian Real Estate Fund
140
Incepted in April 2005 The objective is to achieve maximum capital growth by investing in real estate objects on the actively developing market in Ukraine
120 100 Jan-06
Sep-07
May-09
Dec-10
Citadele Ukrainian Balanced Fund Performance as of 31/12/10 3 months
6 months
1 year
YTD
Since inception
Annualized since inception*
8.93%
12.64%
16.69%
16.69%
72.00%
11.38%
* annualized performance is calculated, using ACT/360 method
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Contact details President, CEO Vladimirs Ivanovs phone +371 6 701 0345 fax +371 6 701 0253 e-mail:
[email protected]
Portfolio Manager (Ukraine) Aleksey Dudarenko phone +38 044 569 1088;1089 fax +38 044 569 1085 e-mail:
[email protected]
Portfolio Manager Anton Lubenko phone +371 6 701 0555 fax +371 6 701 0747 e-mail:
[email protected]
Business Development Department Tatjana Kovalova phone +371 6 7010989 fax +371 6 7778622 e-mail:
[email protected]
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Important information The information contained in this review was obtained in good faith from sources believed to be reliable. No guarantee, explicit or implicit, is provided with respect to completeness and accuracy of the information. The opinions expressed represent the current opinion of the authors and do not represent the opinion of Citadele Asset Management or any of its affiliates, subsidiaries or representatives. The opinions are subject to change without prior notice. Neither Citadele Asset Management nor any of its affiliates, subsidiaries or representatives accepts the liabilities arising from the possible use of the information contained in this review. This material is provided for informational purposes only and should not be construed as advice to buy, hold or sell a particular security or investment. Any investment you make shall be based solely on your own evaluation of your financial circumstances and investment objectives.
Past performance is not a guide to future performance. The opinions expressed are based on Citadele Asset Management’s internal forecasts and should not be relied upon as indicating any guarantee of return from an investment in our funds. Citadele Asset Management is a business name of Citadele Asset Management IPAS, registered in Latvia on 11/01/2002, Reg.No. 40003577500. Registered Office: Republikas square 2A, Riga, LV-1010, Latvia. Authorised and regulated in Latvia by Financial and Capital Market Commission, license No. 06.03.07.098/181. Contact us at Citadele Asset Management, Republikas square 2A, Riga, LV-1010, Latvia. Tel: +371 67010810, Fax: +371 67778622, Email:
[email protected]
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