Business • February 22 2004

La Valette funds under management increase 48 per cent

Valletta Fund Management, recently hosting an AGM for shareholders of the La Valette Funds SICAV plc, announced that shareholders' funds as at 30 September 2003 stood at GBP155.6 million, an increase of 48.46 per cent from the previous year.
During the AGM, the Directors presented the Shareholders present the Annual Report and Financial Statements of the Company for the year ended 30 September 2003 which included an informative market report. The resolutions on the Agenda were all approved by the Shareholders present.
Shareholders were given presentations by Alex Illingworth, Director of Global Equities at Insight Investment Management, by Edward Rizzo, from Rizzo, Farrugia & Co. (Stockbrokers) Ltd., and Kenneth Farrugia, Assistant General Manager of Valletta Fund Management.
During his presentation, Alex Illingworth addressed the prevailing scenario across the major international markets with reference to how these markets effected the performance of funds within the La Valette Funds SICAV plc. Mr Illingworth noted how after a period of low returns in the lead up to the Iraq conflict, global stock markets started to recover. “Towards the end of 2002 and up to March 2003 equity markets were affected by concerns about the weakness of global economic activity particularly in the US. These were further affected by the geopolitical tensions of the period. Investors in the UK stock market, showing high levels of risk aversion, continued to favour defensive sectors which performed relatively well throughout the prewar period. An acceleration in mergers and acquisitions together with encouraging corporate data, encouraged investors to increase their appetite for risk.”
Mr Illingworth added “such positive performances gains prevailed mostly amongst technology and media companies, which after successfully cutting costs, now offer much better value after suffering three years of poor relative performance. During the third quarter of 2003, investors began to over value these type of stocks focusing on the riskier lower-quality companies. However investors are now turning back to quality stocks with sustainable earnings prospects.”
Referring directly to the bond markets, Mr Illingworth described that although yields in these markets reached new lows in March 2003, these have since, risen as the equity markets have recovered and the US bond market has fallen. “Global bond markets faired poorly after July and August 2003 saw a string of positive US data releases. This brought forward the expected timing of an end to easy US monetary policy and global bond markets declined. While the dollar continued to weaken the euro strengthened in September denting enthusiasm for exporters. The overall strength of the euro had a negative effect on the euro region's exporters. This effect is likely to be felt by both companies and the region's economies for some time to come.”
“A reversal in yields is anticipated. The attraction of holding bonds has increased, certainly against cash, although the expected degree of ongoing bond issuance entails remaining somewhat cautious. If economic growth begins to disappoint into the year 2004, there may be more scope to increase bond exposure,” concluded Mr Illingworth.
Edward Rizzo, meanwhile, spoke about the local capital market and updated shareholders with developments in the equity and bond markets since the previous Annual General Meeting. With reference to the equity market, Rizzo said: "The MSE Share Index appreciated by 13.6 per cent during 2003, the first annual gain after two negative years. 2004 started on a very positive note with the Index up 10.5 per cent. Trading activity in the shares of the larger companies has substantially increased over last year, clearly indicating that investors are returning to the equity market as company's financial results improve and dividend yields to shareholders increase to very attractive levels, especially when compared to other types of investments."
Speaking on the bond market, Rizzo explained: "2003 was also a positive year for the bond market as interest rates dropped to historic lows and also as a result of the high liquidity in the financial system. This resulted in a number of Malta Government Stock prices reaching record highs pushing yields to unprecedented lows. This positive performance is however unlikely to follow through the current year since the interest rate cycle is likely to have run its course".
Rizzo concluded his presentation by saying that equities are expected to outperform bonds again in 2004. This should result in the La Valette Malta Fund outperforming the La Valette Malta Bond Fund.
In his presentation, Kenneth Farrugia delved into an outlook of the Maltese market and noted how as interest rates continued to fall, dividend yields on various equities listed on the Malta Stock Exchange started to look increasingly attractive. “As companies generally continued to report satisfactory financial results throughout the period, investors selectively returned to the equity market attracted more particularly to those companies which reported improved financial performances. Most encouraging, was the increase in turnover levels registered on the Malta Stock Exchange.”
Mr Farrugia also said that following the negative performance of the past 3 years, the period 30 September 2002 to 30 September 2003 proved to be a positive one where the quoted share price of the La Valette Malta Fund rose by 15.10 per cent from Lm1.635 to Lm1.882. Following the financial year ended 30 September 2003, the Fund’s share price continued to appreciate by an additional 11.58 per cent, registering a share price of Lm2.10 as at 12 February 2004. The Fund registered an Annualised Return of 10.13 per cent.