2011 Report.pdf - Fortress Fund Managers

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Investment Performance The Fund has generated a compound annual rate of return of 5.7% per year (with all income re-invested) since inception in 2002. Over the years, there has been relatively little variability in the yearly returns, though some years have naturally been higher than others. Unfortunately, the year ended September 30, 2011 saw a below average gain of 2.3%. Performance was particularly affected in the July to September quarter, when global credit markets fell sharply on fears emanating from the crisis in European debt. The Fund’s holdings in some corporate and government bonds declined, and the interest income earned during the period was not enough to outweigh the declines. Investment Performance as of 9/30/11 3 mo. 1 year 3 year 5 year Inception Caribbean High Interest Fund -1.1% 2.3% 3.8% 5.1% 5.7% (Accumulation shares) * periods longer than 1 year are annual compound returns Interest rates on the highest quality investments remain near zero globally – not an easy situation for risk-conscious bond investors. Over the last year though, investors’ perception of risk has broadened to include as “risky” many issuers previously considered “safe”. This has pushed their yields higher, in some cases dramatically higher. At the right price, this provides the opportunity to include bonds paying higher rates in the Fund’s diversified portfolio. Looking forward, we remain concerned that Caribbean government bond prices do not yet reflect the risks involved in owning them. As a result we have been positioning the portfolio as a whole relatively conservatively, with a large weight in short term treasury bills and deposits. In coming months, this caution may continue to result in returns that are below the historic average for the Fund. At September 30, the average yield of the Fund’s holdings was approximately 5%. Caribbean High Interest Fund Net Asset Value Since Inception 4 Barbados $ 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 Annual compound return since inception: 5.7% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Portfolio Positioning The Fund’s portfolio continues to be widely diversified among a number of different regional and international investments. These include Barbados dollar bank deposits, treasury bills, corporate bonds, US dollar government and corporate bonds, and specialised funds and strategies investing globally in income-producing assets. The portfolio is constructed to maximise return from diversified sources, while limiting overall risk and maintaining a high level of liquidity. Geographic Distribution of Portfolio 4% 1% 63% BARBADOS 2% 30% OECS INTERNATIONAL JAMAICA TRINIDAD Top 5 Holdings Holding Country/Region Sector Weight CIBC FirstCaribbean Deposit 12/26/11 Barbados Financial 18.1% University of West Indies 9/29/2027 Barbados Government 5.8% Fortress Equity Income Strategy US Various 5.4% Templeton Global Bond Fund Global Various 4.8% Goddard Enterprises 12/1/2011 Barbados Conglomerate 4.5% With interest rates low and our concern over declining credit quality in Caribbean government bonds, the portfolio at the moment is squarely in “defensive” mode. Its average term to maturity is only 2.5 years, limiting the sensitivity to movements in interest rates. In addition, the Fund’s exposure to long term regional debt is very small. There is a heavy emphasis instead on short-term investments such as treasury bills and deposits whose values would likely be unaffected by negative developments in either government creditworthiness or inflation. While the clear majority of the Fund is invested in Barbados, as necessitated by currency controls, approximately 40% is invested in US dollars and other global currencies. At September 30, the average yield of the Fund’s diversified mix of holdings was approximately 5%. For a complete listing of the Fund’s holdings at September 30, 2011, please see the accompanying financial statements. 5
Page 1 and 2: 2011 Annual Report Fortress Caribbe
Page 3 and 4: FORTRESS Caribbean High Interest Fu
Page 5: Directors & Administrators DIRECTOR
Page 10 and 11: Directors’ Report “The Fund’s
Page 12 and 13: Directors’ Report Cont. PORTFOLIO
Page 15 and 16: Financial Statements 13
Page 18 and 19: Fortress Caribbean High Interest Fu
Page 41: FORTRESS FUND MANAGERS LIMITED FIRS

2011 Report.pdf - Fortress Fund Managers

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