Sri Lanka’s Ceylon Tourism Fund by CAM with Deutsche Bank to Invest 0.5bn in 10 Key Leisure Companies

01st August 2010, www.thebottomline.lk, By Santhush Fernando

Ceylon Tourism Fund - Sri Lanka’s first ever sector fund launched by the ambitious Ceylon Asset Management is hopeful of raising a half a bn rupees. “We anticipate to raise about 500 mn rupees within the next three months, out of which a 200 million has already been committed by investors,” said Dulindra Fernando, the Managing Director of Ceylon Asset Management, the only index fund manger in Sri Lanka.

Ceylon Asset Management (CAM) in partnership with Deutsche Bank AG to introduce the Ceylon Tourism Fund, to capture returns from the Top 10 tourism companies listed on the Colombo Stock Exchange (CSE). lt is the first ever tourism sector fund, structured as an open-ended, equity fund that lets investors invest and exit at any time. The Fund will distribute tax-free income from profits on an annual basis. It captures over 70% market capitalisation of the Hotel and Tourism sector of the CSE, including both Colombo hotels as well as resorts.

The tourism sector which first blossomed in the late seventies was one of the worst affected sectors that have struggled since 1983. It will also be the greatest beneficiary of “peace” where Sri Lanka can open itself to the travel world in its true magnificence for the first time. It is probably the Industry that will lead to Sri Lanka’s economic recovery, in the midst of the Global Financial Crisis.

New York Times has rated Sri Lanka as the No.1 tourist destination in the world to visit while National Geographic rated Sri Lanka the 2nd best island destination in the world to visit after Cuba. Tourism arrivals have doubled from the Middle East during the year 2010 while tourists from India have increased 78.4%. The total number of tourists between the January and June 2010 has increased nearly 50%. Colombo hotels have experienced a surge of guests from India, in the form of corporate sales conferences and weddings etc. The recent reduction in import duties and the IIFA publicity in India are expected to position Sri Lanka to emerge as a regional shopping hub to promote Tourism, along the lines of Singapore and Dubai. The Ceylon Tourist Board expects more than 575,000 tourist arrivals during 2010 alone. The year 2011 is the Visit Sri Lanka year.

Sri Lanka’s key constraints are the limited 14,500 rooms and the infrastructure, both of which are the focus areas of policy makers today. Most hotels are rapidly refurbishing and expanding, while many investors are getting into position with acquisitions and mergers. The sector has outperformed the market (ASP) in 2009 as well as 2010 as it bounces back as the leading sector on the CSE.

The Ceylon Tourism Fund invests in ten key companies in the Hotels and Travel Sector. The companies are Aitken Spence Hotels, John Keells Hotels, Asian Hotel & Properties, Taj Lanka Hotels, Ceylon Hotels Corporation, Hotel Services (Ceylon), Royal Palm Beach Hotels, Amaya Leisure (former Connaisance), Light House Hotel (managed by Jetwing), The Fortress Resort PLC etc. The Top 10 tourism companies posses the management skills, service standards, marketing relationships and the capital to leverage profits and expand market share in the near term.

On July 28, 2010, the Units will be offered at the IPO price of Rs. 10 with a minimum investment of Rs. 10,000. Deutsche Bank, a leading global bank, is the Trustee and Custodian of the fund. Ceylon Tourism Fund is licensed by the Securities and Exchange Commission of Sri Lanka. Unit trusts are tax-free vehicles regulated by the SEC to protect the interests of investors. Unit Trusts, also known as Mutual Funds enable investors to gain expert fund management and enjoy a diversified portfolio, regardless of the size of investment. Open-ended Unit Trusts enable investors to exit at any time with a bank cheque in their favour issued within 3 days.

Ceylon Asset Management has a 10 year track record in index fund management to offer stock market returns without speculative or trading risks. CAM also manages two other funds namely the Ceylon Index Fund and the Ceylon Income Fund. CAM is an associate company of Sri Lanka Insurance Corporation.