AAB Liquidity fund report

1. BOTSWANA LIQUIDITY FUND
DECEMBER 2016
Statutory disclosure and general terms and conditions: Unit trusts are generally medium to long term investments. The value of units may go down as well as up and past performance is no indication of future growth. All information
and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No
one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation
or warranty, express or implied, with respect to the correctness, completeness of the information and opinions. We do not undertake to update, modify or amend the information or accuracy on a frequent basis or to advise any person
if such information subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only.
FUND PARTICULARS
Fund Managers: Lorato Kedisitse & Justin de Klerk
Fund Type: Botswana Money Fund
Currency: BWP denominated
Benchmark: Wholesale Overnight Call Rate + 2%
Fund Start Date: 1 August 2002
Fund Size: BWP 1.1 Billion
Minimum Investment: BWP 10,000 lump sum
Initial Fee: None
Annual Management Fee: Max 1% p.a.
Income Distribution: Monthly
Trustee & Custodian: Stanbic Bank Botswana
Auditors: KPMG
ANNUALISED GROSS RETURNS TO UNITHOLDERS AS AT 31 DEC 2016
Liquidity Fund Call Account + 2%
Three Months 0.79% 0.63%
Six Months 1.63% 1.24%
1 Year 3.64% 2.46%
3 Years 5.35% 2.61%
ASSET ALLOCATION AS AT 31 DECEMBER 2016
CONTACT DETAILS
African Alliance Botswana
African Alliance House, Fairgrounds Office Park, Gaborone
PO Box 2770, Gaborone
Telephone: +267 364 3900 Facsimile: +267 318 8956
Email: info@africanalliance.co.bw
Internet: www.africanalliance.com
REGULATORY
Stanbic Bank Botswana is the Fund’s independent trustee and
custodian. It is responsible for settlement, custodial services and
monitoring compliance in terms of the Fund’s trust deed and
mandate. The Fund is registered and approved by the Bank of
Botswana and NBFIRA and as such is subject to the Collective
Investment Undertaking Act 1999.
FUND MANAGER’S COMMENTS
The African Alliance Botswana Liquidity Fund (AABLF) returned 0.79%
ahead of the benchmark, which returned 0.63%. The fund also
outperformed the benchmark over one, two and three years. The
Fund’s effective annual yield moved down marginally to 3.38% in
December (Sept: 3.43%).
The MPC met in December and maintained the benchmark Bank Rate
unchanged at 5.5%. However, the historically low interest rate
environment, excess liquidity and the aggressive bidding at the
government bond auction continued to drive the money market yields
further down over the quarter. At the December government auction,
the stop out yield on the 6-month Treasury Bill came in at 1.002%
(Sept: 1.102%). The 91-day BOBC ended December unchanged from
the previous month at 1.010%, however q-o-q and y-o-y the BOBC rate
fell 2% and 13% respectively.
We expect money market yields to remain relatively flat in the short
to medium term, whilst we ascribe a low probability to the possibility
of another rate cut. We anticipate inflationary pressures to likely
start to build into 2017. In the medium to long term (2018), we expect
yields to gradually tick up as the Bank of Botswana starts hiking rates,
but for now our strategy is to enhance yield via additional term as
well as corporate exposure.
The fund’s weighted duration was at 83 days at the end of the quarter
versus the mandated limit of 91 days.
INVESTMENT AIM
The primary objective of this Fund is to provide an attractive level of
current income while preserving capital. The Fund may only invest in
money market instruments with a maturity of less than thirteen
months and the weighted average term of the portfolio may not
exceed ninety days. The Fund aims to outperform regular fixed
deposits and call accounts over time.
INVESTMENT UNIVERSE
The Fund invests in high quality, short-term financing instruments and
deposits providing investors with access to the wholesale money
market, usually the exclusive preserve of the banking sector. This
Fund is highly liquid, cost effective and safe, making it a viable
alternative to bank deposits.
WHO SHOULD INVEST?
The Fund is suitable for conservative investors seeking an investment
avenue for short-term savings. The time horizon for this Fund is
typically less than for other unit trusts and is usually of a short to
medium-term nature.
RISK PROFILE
This is a low risk fund.
Lower risk RISK Higher risk
Income OBJECTIVE Capital Growth
Money Market,
e.g. African
Alliance Botswana
Liquidity Fund
Fixed Income,
e.g. African
Alliance
Botswana Global
Income Fund
Balanced,
e.g. African
Alliance Botswana
Value and Global
Allocation Funds
Equity

2. BOTSWANA LIQUIDITY FUND
DECEMBER 2016
Statutory disclosure and general terms and conditions: Unit trusts are generally medium to long term investments. The value of units may go down as well as up and past performance is no indication of future growth. All information
and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No
one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation
or warranty, express or implied, with respect to the correctness, completeness of the information and opinions. We do not undertake to update, modify or amend the information or accuracy on a frequent basis or to advise any person
if such information subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only.